Securities Act Registration No. 33-96634
Investment Company Act Reg. No. 811-9094
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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 6 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 7 |X|
(Check appropriate box or boxes.)
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LEUTHOLD FUNDS, INC.
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(Exact Name of Registrant as Specified in Charter)
100 North Sixth Street, Suite 700A
Minneapolis, Minnesota 55403
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(Address of Principal Executive Offices) (ZIP Code)
(612) 332-9141
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(Registrant's Telephone Number, including Area Code)
Copy to:
Steven C. Leuthold
Leuthold & Anderson, Inc. Richard L. Teigen
100 North Sixth Street Foley & Lardner
Suite 700A 777 East Wisconsin Avenue
Minneapolis, Minnesota 55403 Milwaukee, Wisconsin 53202
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(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective.
It is proposed that this filing become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a) (1)
[ ] on (date) pursuant to paragraph (a) (1)
[ ] 75 days after filing pursuant to paragraph (a) (2)
|X| on June 15, 2000 pursuant to paragraph (a) (2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
Prospectus
June 15, 2000
(LEUTHOLD SELECT INDUSTRIES FUND LOGO)
(GRIZZLY SHORT FUND LOGO)
Leuthold Select Industries Fund seeks capital appreciation. It invests
substantially all of its assets in equity securities traded in the U.S.
securities markets.
The Grizzly Short Fund sells short common stocks of U.S. companies. The
aggregate amount of its outstanding short positions typically will be
approximately equal to its outstanding net assets.
Please read this Prospectus and keep it for future reference. It contains
important information, including information on how the Funds invest and the
services they offer to shareholders.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
An investment in the Funds is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
Leuthold Select Industries Fund
Grizzly Short Fund
100 North Sixth Street
Suite 700A
Minneapolis, Minnesota 55403
(612) 332-9141
TABLE OF CONTENTS
Questions Every Investor Should Ask
Before Investing in the Funds 1
Fees and Expenses 3
Investment Objectives and Strategies 4
Management of the Funds 4
The Funds' Share Price 7
Purchasing Shares 8
Redeeming Shares 10
Exchanging Shares 12
Dividends, Distributions and Taxes 12
QUESTIONS EVERY INVESTOR SHOULD ASK BEFORE
INVESTING IN THE FUNDS
1. WHAT ARE THE FUNDS' GOALS?
LEUTHOLD SELECT INDUSTRIES FUND
Leuthold Select Industries Fund seeks capital appreciation.
GRIZZLY SHORT FUND
Grizzly Short Fund seeks capital appreciation. However, as its principal
investment strategy is to sell stocks short, it may be difficult for the Fund to
achieve its goal in rising stock markets.
2. WHAT ARE THE FUNDS' PRINCIPAL INVESTMENT STRATEGIES?
LEUTHOLD SELECT INDUSTRIES FUND
Leuthold Select Industries Fund seeks capital appreciation by investing
substantially all of its assets in equity securities traded in the U.S.
securities markets. The Select Industries Fund utilizes a disciplined,
unemotional, quantitative investment approach that is based on the belief
investors can achieve superior investment performance through group selection.
The Fund's investment adviser, Leuthold Weeden Capital Management, LLC (the
"Adviser") believes that as shifts among industry groups in the equity market
have become more dramatic, group selection has become as, or more, important
than individual stock selection in determining investment performance.
The Adviser considers a group to be a collection of stocks whose investment
performance tends to be similarly influenced by a variety of factors. The
Adviser currently monitors about 125 groups. The five major types of groups the
Adviser monitors are:
O Traditional Broad Economic Sectors such as Information Technology,
Health Care, or Financial Services.
O Thematic Broad Groups that may bridge a number of industries such as
"Inflation Beneficiaries" or "Education".
O Industry Specific Groups are narrower themes. Examples include
"Airlines," "Healthcare Facilities" or "Semiconductors".
O Quantitative Themes are groups where the only commonality of the stocks
in the group are statistical with typically no industry commonality.
Examples include "Emerging Growth" or "Undervalued and Unloved".
O Special Situations are groups that the Adviser may monitor for only a
limited period of time. Examples include "Asia Exposure" and "Year 2000
Problem Solvers".
The Select Industries Fund will invest in companies of all sizes and industries
as well as in "growth" stocks and "value" stocks. The Adviser updates its group
selection monthly and will adjust the Fund's portfolio as necessary to keep the
Fund invested in stocks in those groups which the Adviser believes are the most
attractive.
GRIZZLY SHORT FUND
The Grizzly Short Fund sells stocks short. The aggregate amount of its
outstanding short positions typically will be approximately equal to its net
assets. When the Fund's outstanding short positions equal its net assets, it is
"100% short." Like the Select Industries Fund, the Grizzly Short Fund utilizes a
disciplined, unemotional, quantitative investment approach. The Grizzly Short
Fund believes that in all market conditions there will exist some companies
whose stocks are overvalued by the market and that capital appreciation can be
realized by selling short those stocks. However the best overall results
typically will be achieved in declining stock markets. In rising stock markets
the risk of loss usually is much greater.
The Fund's investment adviser, also Leuthold Weeden Capital Management, LLC,
follows a universe of domestic common stocks that:
O Have a market capitalization in excess of $1 billion; and
O Trade, on average, shares having a value of $1 million or more each day.
The Fund generally will have outstanding approximately 50 stocks that it has
sold short. The Fund may increase the number of stocks it sells short if market
conditions warrant an increase. These stocks will be diversified over a number
of industries. In determining which stocks to sell short, the Adviser
calculates a Vulnerability Index for each security in the universe of stocks it
follows. The Vulnerability Index attempts to identify those stocks which are
most likely to decline in price or to underperform the market. In calculating a
Vulnerability Index the Adviser considers twelve or more components. Some of
the components include fundamental factors such as earnings growth or dividends,
while other components consider market factors such as institutional trading
activity or insider buying or selling. From time to time the Fund may sell
short index-related securities. The Fund will do so to rapidly increase its
short position.
The Fund also follows a disciplined approach in determining when to cover its
short positions. The factors the Adviser considers in determining when to cover
short positions include:
O Price movements of the stocks sold short;
O Changes in the Vulnerability Index;
O Daily trading volume of the stock; and
O News and articles concerning the stock appearing in financial services
and publications.
3. WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?
Investors in either Fund may lose money. There are risks associated with each
Fund's principal investment strategies.
LEUTHOLD SELECT INDUSTRIES FUND
O MARKET RISK: The Fund invests principally in common stocks. The prices
of the stocks in which the Fund invests may decline for a number of
reasons. The price declines may be steep, sudden and/or prolonged.
O FOREIGN SECURITIES RISK: Some of the securities in which the Fund
invests may be issued by foreign companies, either directly or through
American Depository Receipts ("ADRs"). Investments in these securities,
even though publicly traded in the United States, may involve risks
which are in addition to those inherent in domestic investments.
Foreign companies may not be subject to the regulatory requirements of
U.S. companies and, as a consequence, there may be less publicly
available information about such companies. Also foreign companies may
not be subject to uniform accounting, auditing and financial reporting
standards and requirements comparable to those applicable to U.S.
companies.
O HIGH PORTFOLIO TURNOVER RISK: High portfolio turnover necessarily
results in correspondingly greater transaction costs (such as brokerage
commissions or markups or markdowns) which the Fund must pay and
increased realized gains (or losses) to investors. Distributions to
shareholders of short-term capital gains are taxed as ordinary income
under federal income tax laws.
O QUANTITATIVE INVESTMENT APPROACH RISK: The Fund utilizes a quantitative
investment approach based on past market performance. While the Adviser
continuously reviews and refines, if necessary, its investment approach,
there may be market conditions where the quantitative investment
approach performs poorly.
GRIZZLY SHORT FUND
O MARKET RISK: The prices of the securities the Fund has sold short may
rise for a number of reasons.
O SHORT SALES RISK: The Fund's investment performance will suffer if a
security that it has sold short appreciates in value. The Fund's
investment performance may also suffer if it is required to close out a
short position earlier than it had intended. This would occur if the
securities lender required the Fund to deliver the securities the Fund
borrowed at the commencement of the short sale and the Fund was unable
to borrow the securities from other securities lenders.
O RISING STOCK MARKET RISK: The Fund typically will be "100% short."
Accordingly in rising stock markets its risk of loss will be greater
than in declining stock markets. Over time stock markets have risen
more often than they have declined. Investors who wish to hedge some or
all of their stock portfolios might find that investment goal consistent
with an investment in the Fund. However because movements in the prices
of the stocks the Fund has sold short are unlikely to correlate
perfectly with the stocks in an investor's portfolio, such an investor
could incur both a loss on the investor's stock portfolio and the
investor's investment in the Fund.
O HIGH PORTFOLIO TURNOVER RISK: High portfolio turnover necessarily
results in correspondingly greater transaction costs (such as brokerage
commission or markups or markdowns) which the Fund must pay and
increased realized gain (or losses) to investors. Distributions to
shareholders of short-term capital gains are taxed as ordinary income
under federal income tax laws.
O QUANTITATIVE INVESTMENT APPROACH RISK: The Fund utilizes a quantitative
investment approach based on past market performance. While the Adviser
continuously reviews and refines, if necessary, its investment approach,
there may be market conditions where the quantitative investment
approach performs poorly.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and
hold shares of the Funds.
SHAREHOLDER FEES
(fees paid directly from your investment)
LEUTHOLD SELECT GRIZZLY
INDUSTRIES FUND SHORT FUND
--------------- ----------
Maximum Sales Charge No No
(Load) Imposed on Sales Sales
Purchases (as a Charge Charge
percentage of
offering price)
Maximum Deferred Sales No No
Charge (Load) Deferred Deferred
Sales Sales
Charge Charge
Maximum Sales Charge No No
(Load) Imposed on Sales Sales
Reinvested Dividends Charge Charge
and Distributions
Redemption Fee None*<F1> None*<F1>
Exchange Fee None**<F2> None**<F2>
*<F1> Our transfer agent charges a fee of $12.00 for each wire redemption.
**<F2> Our transfer agent charges a fees of $5.00 for each telephone exchange.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
LEUTHOLD SELECT GRIZZLY
INDUSTRIES FUND SHORT FUND
--------------- ----------
Management Fees 1.00% 1.25%
Distribution
(12b-1) Fees None None
Other Expenses:
Service Fees 0.25% 0.25%
All remaining
Other Expenses 0.70%*<F3> 1.00%*<F3>
----- -----
Total Other Expenses 0.95%*<F3> 1.25%*<F3>
----- -----
Total Annual Fund
Operating Expenses 1.95%*<F3> 2.50%*<F3>
----- -----
----- -----
*<F3> Based on our estimates for the fiscal year ending September 30, 2000.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in each Fund for the time periods
indicated and then redeem all of your shares at the end of these periods. The
Example also assumes that your investment has a 5% return each year and that
each Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be:
1 YEAR 3 YEARS
------ -------
Leuthold Select Industries Fund $198 $612
Grizzly Short Fund $253 $779
INVESTMENT OBJECTIVES
AND STRATEGIES
Both the Leuthold Select Industries Fund and the Grizzly Short Fund seek capital
appreciation. Although they have no intention of doing so, each Fund may change
its investment objective without obtaining shareholder approval. Shareholders
will be notified of any such change. Please remember that an investment
objective is not a guarantee. An investment in each Fund might not appreciate
and investors could lose money.
Neither the Leuthold Select Industries Fund nor the Grizzly Short Fund will take
temporary defensive positions. Although neither Fund will take a temporary
defensive position, each Fund will invest in money market instruments (like U.S.
Treasury Bills, commercial paper or repurchase agreements) and hold some cash so
that it can pay expenses and satisfy redemption requests. Because the Grizzly
Short Fund's principal investment strategy is to effect short sales, a
significant portion of its assets will be held in liquid securities, including
money market instruments, as "cover" for its short sales. Typically the
obligations associated with the Grizzly Short Fund's outstanding short sales
will be approximately equal to the Grizzly Short Fund's investments in money
market instruments.
MANAGEMENT OF
THE FUNDS
LEUTHOLD WEEDEN CAPITAL MANAGEMENT, LLC MANAGES EACH FUND'S INVESTMENTS
Leuthold Weeden Capital Management, LLC (the "Adviser") is the investment
adviser to each Fund. The Adviser's address is:
100 North Sixth Street
Suite 700A
Minneapolis, MN 55403
The Adviser is the successor to Leuthold & Anderson, Inc., which commenced
operations in 1987, and Leuthold, Weeden & Associates, L.P., which commenced
operations in 1991, and has been each Fund's only investment adviser. As the
investment adviser to the Funds, the Adviser manages the investment portfolio
for each Fund. It makes the decisions as to which securities to buy and which
securities to sell. The Leuthold Select Industries Fund will pay the Adviser an
annual investment advisory fee equal to 1.00% of its average net assets, and the
Grizzly Short Fund will pay the Adviser an annual investment advisory fee equal
to 1.25% of its average net assets. Steven C. Leuthold and James E. Floyd are
the co-portfolio managers of the Leuthold Select Industries Fund and as such are
primarily responsible for the day-to-day management of that Fund's portfolio.
Steven C. Leuthold and Charles D. Zender are the co-portfolio managers of the
Grizzly Short Fund and as such are primarily responsible for the day-to-day
management of that Fund's portfolio. Mr. Leuthold is the chief executive
officer of the managing member of the Adviser. Mr. Leuthold also has been
Chairman and Portfolio Manager of Leuthold & Anderson, Inc. since its
organization in August, 1987, a portfolio manager of Leuthold, Weeden &
Associates, L.P. since January, 1991 and Chairman of the Leuthold Group since
November, 1981. Mr. Floyd is a Managing Director and a member of the Adviser
and has been a senior analyst of The Leuthold Group since November, 1981. Mr.
Zender is a Managing Director and a member of the Adviser and has been a
Managing Director of The Leuthold Group since 1991.
THE ADVISER HAS CONSTRUCTED A MODEL PORTFOLIO WITH THE SAME INVESTMENT OBJECTIVE
AS THE LEUTHOLD SELECTED INDUSTRIES FUND
Since January 1, 1996 the Adviser and its predecessors have constructed a model
portfolio (the "Model") using substantially similar, though not identical,
investment strategies and techniques as those used by the Leuthold Select
Industries Fund. The results below illustrate the performance of a hypothetical
investment in the Model. Since January 1, 1996 a portion of the assets in
accounts managed by the Adviser and its predecessors were managed using similar,
though not identical, investment strategies and techniques as those used by the
Model and the Leuthold Select Industries Fund. The investment returns before
expenses of the portions of those accounts so managed were not materially
different from those of the Model.
The performance of the Model assumes an initial investment on the Model's
inception date in the securities then selected by the Adviser's quantitative
investment approach. The Model then assumes that securities transactions for
the Model were effected at the same prices and times as securities transactions
for the other accounts managed by the Adviser and its predecessors that then
used the quantitative investment approach utilized by the Leuthold Select
Industries Fund. The performance of the Model includes commission payments,
reflects the reinvestment of dividends and the payment of other expenses accrued
at the annual rate of 1.95% of the Model's average net assets.
The performance information for the Model and the Standard & Poor's Composite
Index of 500 Stocks ("S&P 500") is based on data supplied by the Adviser or from
statistical services, reports or other sources which the Adviser believes are
reliable. This performance information has not been verified by any third party
and is unaudited.
ANNUAL RATES OF RETURN(1)<F4>
YEARS ENDED
DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
Model Portfolio 19.91% 40.72% 15.25% 42.16%
S&P 500 Index 23.00% 33.30% 28.57% 21.02%
COMPOUNDED ANNUAL RATES OF RETURN(1)<F4> SINCE
(FOR THE PERIOD ENDED DECEMBER 31, 1999) 1 YEAR 3 YEARS JANUARY 1, 1996
------ ------- ---------------
Model Portfolio 42.16% 32.11% 28.95%
S&P 500 Index 21.02% 27.53% 26.38%
(1)<F4> Total annual rate of return is the change in redemption value of units,
assuming the reinvestment of dividends. Compounded annual rate of
return represents the level annual rate which, if earned for each year
in a multiple year period, would produce the cumulative rate of return
over that period.
Investors should remember that past performance is not necessarily an indication
of future performance. Investors should not consider the performance data of
the Model to be an indication of the future performance of the Leuthold Select
Industries Fund or the results an individual investor might achieve by investing
in the Leuthold Select Industries Fund.
Investors should also recognize that there are limitations inherent in reporting
the performance of a model portfolio. The performance of the Model, while based
on actual trades, does not reflect trading by the Model. An investor purchasing
or selling the same securities as the Model may not have been able to purchase
or sell them at the same price as reflected in the performance of the Model.
The performance of the Model does not reflect the effects of cash flows in and
out of the portfolio. Unlike the Model, the Leuthold Select Industries Fund
will purchase and sell investments continuously and may not be able to be fully
invested at all times as was the Model.
THE ADVISER HAS EXPERIENCE MANAGING ACCOUNTS WITH THE SAME INVESTMENT OBJECTIVE
AS THE GRIZZLY SHORT FUND
We are providing historical performance data of investment advisory accounts
managed by the Adviser and its predecessors. The data illustrates the
investment performance of all portfolios similar to the Grizzly Short Fund and
compares the performance to specified market indices. The Short Portfolio
Composite includes all active accounts of the Adviser and its predecessors
invested in the Advant-Hedge Short Selling Program. The Short Portfolio
Composite does not include all of the assets under management of the Adviser and
its predecessors, but does include all accounts having the same investment
objective as the Grizzly Short Fund. It may not accurately reflect the
performance of all accounts managed by the Adviser and its predecessors. The
accounts included in the Short Portfolio Composite had the same investment
objective as the Grizzly Short Fund and were managed using substantially
similar, though not in all cases identical, investment strategies and techniques
as those used by the Grizzly Short Fund. All performance data is historical and
investors should not consider this performance data as an indication of the
future performance of the Grizzly Short Fund or the results an individual
investor might achieve by investing in the Grizzly Short Fund. Investors should
not rely on the historical performance of the Adviser and its predecessors when
making an investment decision.
All returns are time-weighted total rates of return and include the reinvestment
of interest and the payment of dividends on securities sold short. The
performance information for the Short Portfolio Composite is net of the advisory
fees charged by the Adviser and its predecessors to the accounts comprising the
Short Portfolio Composite and all other expenses (except custody and related
expenses). The performance information for the Short Portfolio Composite does
not reflect the assessment of the Grizzly Short Fund's advisory fee or other
expenses equivalent to the Grizzly Short Fund's operating expenses. The fees
and expenses of the Short Portfolio Composite were less than the annual expenses
of the Grizzly Short Fund. The performance of the Short Portfolio Composite
would have been lower had the Short Portfolio Composite incurred higher fees
and expenses. The net effect of the deduction of the Grizzly Short Fund's
advisory fee and other operating expenses on annualized performance, including
the compounded effect over time, may be significant. The Short Portfolio
Composite was not subject to certain investment limitations, diversification
requirements and other restrictions imposed by the Investment Company Act of
1940 and the Internal Revenue Code. If it had been, its performance may have
been adversely affected.
The performance information for the Short Portfolio Composite and the S&P 500 is
based on data supplied by the Adviser or from statistical services, reports or
other sources which the Adviser believes are reliable. This performance
information has not been verified by any third party and is unaudited. AS
DEMONSTRATED BELOW A SHORT FUND IN A GENERALLY RISING STOCK MARKET CAN BE
EXPECTED TO SIGNIFICANTLY UNDERPERFORM THE S&P 500 AND OTHER COMPARABLE BROAD-
BASED STOCK MARKET INDICES. PORTFOLIO GAINS FOR A SHORT FUND ARE TYPICALLY
REALIZED IN DECLINING STOCK MARKET PERIODS.
<TABLE>
ANNUAL RATES OF RETURN(1)<F5>
YEARS ENDED
DECEMBER 31, 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Short Portfolio Composite (1.25)% 2.66% (20.16)% (8.99)% (4.83)% (0.89)% (3.36)%
S&P 500 Index 10.01% 1.22% 37.47% 23.00% 33.30% 28.57% 21.02%
COMPOUNDED ANNUAL RATES OF RETURN(1)<F5> SINCE
(FOR THE PERIOD ENDED DECEMBER 31, 1999) 1 YEAR 3 YEARS 5 YEARS JUNE 1, 1992
------ ------- ------- ------------
Short Portfolio Composite (3.36)% (3.04)% (7.91)% (5.60)%
S&P 500 Index 21.02% 27.53% 28.52% 20.71%
</TABLE>
(1)<F5> The calculation of the rates of return was performed in accordance with
the principles set forth in the Performance Presentation Standards
endorsed by the Association for Investment Management and Research
("AIMR"). Other performance calculation methods, including the SEC
method, may produce different results. The AIMR performance
presentation criteria require the presentation of at least a ten-year
performance record or performance for the period since inception, if
shorter.
Total annual rate of return is the change in redemption value of units,
assuming the reinvestment of dividends. Compounded annual rate of
return represents the level annual rate which, if earned for each year
in a multiple year period, would produce the cumulative rate of return
over that period.
Please remember that past performance is not necessarily an indication of future
performance. Investors should also be aware that other performance calculation
methods may produce different results, and that comparisons of investment
results should consider qualitative circumstances and should be made only for
portfolios with generally similar investment objectives.
SERVICE PLANS
Each of the Funds has adopted a service plan pursuant to which it may pay fees
of up to 0.25% of its average daily net assets to broker-dealers, financial
institutions or other service providers that provide services to investors in
the Funds. These services may include:
O assisting investors in processing purchase, exchange and redemption
requests;
O processing dividend and distribution payments from the Funds;
O providing information periodically to customers showing their positions
in Fund shares;
O providing sub-accounting;
O forwarding communications from the Funds to their shareholders.
Because these fees are paid out of a Fund's assets, over time these fees will
increase the cost of your investment.
THE FUNDS' SHARE PRICE
The price at which investors purchase shares of a Fund and at which shareholders
redeem shares of a Fund is called its net asset value. Each Fund calculates its
net asset value as of the close of regular trading on the New York Stock
Exchange (normally 4:00 p.m. Eastern Time) on each day the New York Stock
Exchange is open for trading. The New York Stock Exchange is closed on holidays
and weekends. Each Fund calculates its net asset value based on the market
prices of the securities (other than money market instruments) it holds. The
Funds value most money market instruments they hold at their amortized cost.
Each Fund will process purchase orders that it receives and accepts and
redemption orders that it receives prior to the close of regular trading on a
day in which the New York Stock Exchange is open at the net asset value
determined LATER THAT DAY. They will process purchase orders that they receive
and accept and redemption orders that they receive AFTER the close of regular
trading at the net asset value determined at the close of regular trading on the
NEXT DAY the New York Stock Exchange is open.
PURCHASING SHARES
HOW TO PURCHASE SHARES FROM THE FUNDS
O Read this Prospectus carefully.
O Determine how much you want to invest, keeping in mind the following
minimums:
NEW ACCOUNTS
Individual Retirement
Accounts $ 1,000
All other accounts $10,000*<F6>
*<F6> The Funds may, but are not required to, accept initial
investments of not less than $1,000 from investors who are
related to, or affiliated with, shareholders who have invested
$10,000 in the Funds.
EXISTING ACCOUNTS
Dividend reinvestment No Minimum
Automatic
Investment Plan $ 50
All other accounts $100
O Complete the Purchase Application accompanying this Prospectus,
carefully following the instructions. For additional investments,
complete the Additional Investment Form attached to your Fund's
confirmation statements. (The Funds have additional Purchase
Applications and Additional Investment Forms if you need them.) If you
have any questions, please call 1-800-273-6886.
O Make your check payable to "Leuthold Select Industries Fund" or "Grizzly
Short Fund," as applicable. All checks must be drawn on U.S. banks.
The Funds will not accept cash or third party checks. FIRSTAR MUTUAL
FUND SERVICES, LLC, THE FUNDS' TRANSFER AGENT, WILL CHARGE A $25 FEE
AGAINST A SHAREHOLDER'S ACCOUNT FOR ANY PAYMENT CHECK RETURNED FOR
INSUFFICIENT FUNDS. THE SHAREHOLDER WILL ALSO BE RESPONSIBLE FOR ANY
LOSSES SUFFERED BY A FUND AS A RESULT.
Send the application and check to:
FOR FIRST CLASS MAIL
Leuthold Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
FOR OVERNIGHT DELIVERY SERVICE
OR REGISTERED MAIL
Leuthold Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202-5207
PLEASE DO NOT MAIL LETTERS BY OVERNIGHT DELIVERY SERVICE OR REGISTERED MAIL TO
THE POST OFFICE BOX ADDRESS.
If you wish to open an account by wire, please call 1-800-273-6886 prior to
wiring funds in order to obtain a confirmation number and to ensure prompt and
accurate handling of funds. FUNDS SHOULD BE WIRED TO:
Firstar Bank, N.A.
777 East Wisconsin Avenue
Milwaukee, WI 53202
ABA #075000022
CREDIT:
Firstar Mutual Fund Services, LLC
Account #112-952-137
FURTHER CREDIT:
(name of Fund to be purchased)
(shareholder registration)
(shareholder account number, if known)
You should then send a properly signed Purchase Application marked "FOLLOW-UP"
to either of the addresses listed above. PLEASE REMEMBER THAT FIRSTAR BANK,
N.A. MUST RECEIVE YOUR WIRED FUNDS PRIOR TO THE CLOSE OF REGULAR TRADING ON THE
NEW YORK STOCK EXCHANGE FOR YOU TO RECEIVE SAME DAY PRICING. THE FUNDS AND
FIRSTAR BANK, N.A. ARE NOT RESPONSIBLE FOR THE CONSEQUENCES OF DELAYS RESULTING
FROM THE BANKING OR FEDERAL RESERVE WIRE SYSTEM, OR FROM INCOMPLETE WIRING
INSTRUCTIONS.
PURCHASING SHARES FROM BROKER-DEALERS, FINANCIAL INSTITUTIONS AND OTHERS
Some broker-dealers may sell shares of the Funds. These broker-dealers may
charge investors a fee either at the time of purchase or redemption. The fee,
if charged, is retained by the broker-dealer and not remitted to the Funds or
the Adviser. Some broker-dealers may purchase and redeem shares on a three day
settlement basis.
The Funds may enter into agreements with broker-dealers, financial institutions
or other service providers ("Servicing Agents") that may include the Funds as
investment alternatives in the programs they offer or administer. Servicing
agents may:
O Become shareholders of record of the Funds. This means all requests to
purchase additional shares and all redemption requests must be sent
through the Servicing Agent. This also means that purchases made
through Servicing Agents are not subject to the Funds' minimum purchase
requirement.
O Use procedures and impose restrictions that may be in addition to, or
different from, those applicable to investors purchasing shares directly
from the Funds.
O Charge fees to their customers for the services they provide them.
Also, the Funds and/or the Adviser may pay fees to Servicing Agents to
compensate them for the services they provide their customers.
O Be allowed to purchase shares by telephone with payment to follow the
next day. If the telephone purchase is made prior to the close of
regular trading on the New York Stock Exchange, it will receive same day
pricing.
O Be authorized to accept purchase orders on behalf of the Funds. This
means that the Funds will process the purchase order at the net asset
value which is determined following the Servicing Agent's acceptance of
the customer's order.
If you decide to purchase shares through Servicing Agents, please carefully
review the program materials provided to you by the Servicing Agent. When you
purchase shares of the Funds through a Servicing Agent, it is the responsibility
of the Servicing Agent to place your order with the Funds on a timely basis. If
the Servicing Agent does not place the order on a timely basis, or if it does
not pay the purchase price to the Funds within the period specified in its
agreement with the Funds, it may be held liable for any resulting fees or
losses.
OTHER INFORMATION ABOUT PURCHASING
SHARES OF THE FUNDS
The Funds may reject any share purchase application for any reason. The Funds
will not accept initial purchase orders made by telephone, unless they are from
a Servicing Agent which has an agreement with the Funds.
The Funds will issue certificates evidencing shares purchased only upon request.
The Funds will send investors a written confirmation for all purchases of
shares.
The Funds offer an automatic investment plan allowing shareholders to make
purchases on a regular and convenient basis. The Funds also offer a telephone
purchase option permitting shareholders to make additional purchases by
telephone. The Funds offer the following retirement plans:
TRADITIONAL IRA
ROTH IRA
Investors can obtain further information about the automatic investment plan,
the telephone purchase plan and the IRAs by calling 1-800-273-6886. The Funds
recommend that investors consult with a competent financial and tax advisor
regarding the IRAs before investing through them.
REDEEMING SHARES
HOW TO REDEEM (SELL) SHARES BY MAIL
Prepare a letter of instruction containing:
O account number(s)
O the amount of money or number of shares being redeemed
O the name(s) on the account
O daytime phone number
O additional information that the Funds may require for redemptions by
corporations, executors, administrators, trustees, guardians, or others
who hold shares in a fiduciary or representative capacity. Please
contact the Funds' transfer agent, Firstar Mutual Fund Services, LLC, in
advance, at 1-800-273-6886 if you have any questions.
Sign the letter of instruction exactly as the shares are registered. Joint
ownership accounts must be signed by all owners.
Have the signatures guaranteed by a commercial bank or trust company in the
United States, a member firm of the New York Stock Exchange or other eligible
guarantor institution IN THE FOLLOWING SITUATIONS:
O The redemption proceeds are to be sent to a person other than the person
in whose name the shares are registered
O The redemption proceeds are to be sent to an address other than the
address of record
O The redemption request is received within 30 days after an address
change.
A NOTARIZED SIGNATURE IS NOT AN ACCEPTABLE SUBSTITUTE FOR A SIGNATURE GUARANTEE.
Send the letter of instruction to:
FOR FIRST CLASS MAIL
Leuthold Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
FOR OVERNIGHT DELIVERY SERVICE
OR REGISTERED MAIL
Leuthold Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202-5207
PLEASE DO NOT MAIL LETTERS BY OVERNIGHT DELIVERY SERVICE OR REGISTERED MAIL TO
THE POST OFFICE BOX ADDRESS.
HOW TO REDEEM (SELL) SHARES BY TELEPHONE
Instruct Firstar Mutual Fund Services, LLC that you want the option of redeeming
shares by telephone. This can be done by completing the appropriate section on
the Purchase Application. Shares held in IRAs cannot be redeemed by telephone.
Assemble the same information that you would include in the letter of
instruction for a written redemption request.
Call Firstar Mutual Fund Services, LLC at 1-800-273-6886. PLEASE DO NOT CALL
THE FUNDS OR THE ADVISER.
HOW TO REDEEM (SELL) SHARES THROUGH SERVICING AGENTS
If your shares are held by a Servicing Agent, you must redeem your shares
through the Servicing Agent. Contact the Servicing Agent for instructions on
how to do so.
REDEMPTION PRICE
The redemption price per share you receive for redemption requests is the next
determined net asset value after:
O Firstar Mutual Fund Services, LLC receives your written request in
proper form with all required information.
O Firstar Mutual Fund Services, LLC receives your authorized telephone
request with all required information.
O A Servicing Agent that has been authorized to accept redemption requests
on behalf of the Funds receives your request in accordance with its
procedures.
PAYMENT OF REDEMPTION PROCEEDS
O For those shareholders who redeem shares by mail, Firstar Mutual Fund
Services, LLC will mail a check in the amount of the redemption proceeds
no later than the seventh day after it receives the written request in
proper form with all required information.
O For those shareholders who redeem by telephone, Firstar Mutual Fund
Services, LLC will either mail a check in the amount of the redemption
proceeds no later than the seventh day after it receives the redemption
request, or transfer the redemption proceeds to your designated bank
account if you have elected to receive redemption proceeds by either
Electronic Funds Transfer or wire. An Electronic Funds Transfer
generally takes up to 3 business days to reach the shareholder's account
whereas Firstar Mutual Fund Services, LLC generally wires redemption
proceeds on the business day following the calculation of the redemption
price. However, the Funds may direct Firstar Mutual Fund Services, LLC
to pay the proceeds of a telephone redemption on a date no later than
the seventh day after the redemption request.
O Those shareholders who redeem shares through Servicing Agents will
receive their redemption proceeds in accordance with the procedures
established by the Servicing Agent.
OTHER REDEMPTION CONSIDERATIONS
When redeeming shares of the Funds, shareholders should consider the following:
O The redemption may result in a taxable gain.
O Shareholders who redeem shares held in an IRA must indicate on their
redemption request whether or not to withhold federal income taxes. If
not, these redemptions will be subject to federal income tax
withholding.
O The Funds may delay the payment of redemption proceeds for up to seven
days in all cases.
O If you purchased shares by check, the Funds may delay the payment of
redemption proceeds until they are reasonably satisfied the check has
cleared (which may take up to 15 days from the date of purchase).
O Firstar Mutual Fund Services, LLC will send the proceeds of telephone
redemptions to an address or account other than that shown on its
records only if the shareholder has sent in a written request with
signatures guaranteed.
O Firstar Mutual Fund Services, LLC will not accept telephone redemption
requests made within 30 days after an address change.
O The Funds reserve the right to refuse a telephone redemption request if
it believes it is advisable to do so. The Funds and Firstar Mutual Fund
Services, LLC may modify or terminate their procedures for telephone
redemptions at any time. Neither the Funds nor Firstar Mutual Fund
Services, LLC will be liable for following instructions for telephone
redemption transactions that they reasonably believe to be genuine,
provided they use reasonable procedures to confirm the genuineness of
the telephone instructions. They may be liable for unauthorized
transactions if they fail to follow such procedures. These procedures
include requiring some form of personal identification prior to acting
upon the telephone instructions and recording all telephone calls.
During periods of substantial economic or market change, telephone
redemptions may be difficult to implement. If a shareholder cannot
contact Firstar Mutual Fund Services, LLC by telephone, he or she should
make a redemption request in writing in the manner described earlier.
O Firstar Mutual Fund Services, LLC currently charges a fee of $12 when
transferring redemption proceeds to your designated bank account by wire
but does not charge a fee when transferring redemption proceeds by
Electronic Funds Transfer.
O If your account balance falls below $1,000 because you redeem shares,
you will be given 60 days to make additional investments so that your
account balance is $1,000 or more. If you do not, the Fund may close
your account and mail the redemption proceeds to you.
EXCHANGING SHARES
ELIGIBLE FUNDS
Shares of the Funds may be exchanged for shares of:
O Leuthold Select Industries Fund
O Grizzly Short Fund
O Leuthold Core Investment Fund
O Firstar Money Market Fund
at their relative net asset values. The Adviser also advises the Leuthold Core
Investment Fund. An affiliate of Firstar Mutual Fund Services, LLC, advises
Firstar Money Market Fund. Please call 1-800-273-6886 for prospectuses
describing Leuthold Core Investment Fund and Firstar Money Market Fund. You may
have a taxable gain or loss as a result of an exchange because the Internal
Revenue Code treats an exchange as a sale of shares.
HOW TO EXCHANGE SHARES
1. Read this Prospectus (and, if applicable, the prospectus for Leuthold Core
Investment Fund) carefully.
2. Determine the number of shares you want to exchange keeping in mind that
exchanges are subject to a $10,000 minimum.
3. Call Firstar Mutual Fund Services, LLC at 1-800-273-6886. You may also make
an exchange by writing to Leuthold Funds, Inc., c/o Firstar Mutual Fund
Services, LLC, 3rd Floor, P.O. Box 701, Milwaukee, Wisconsin 53201-0701.
DIVIDENDS, DISTRIBUTIONS
AND TAXES
The Funds distribute substantially all of their net investment income quarterly
and substantially all of their capital gains annually. You have three
distribution options:
AUTOMATIC REINVESTMENT OPTION - Both dividend and capital gains distributions
will be reinvested in additional shares of the Funds.
CASH DIVIDEND OPTION - Dividends will be paid in cash and capital gains will be
reinvested in additional shares of the Funds.
ALL CASH OPTION - Both dividend and capital gains distributions will be paid in
cash.
You may make your distribution election on the Purchase Application. You may
change your election by writing to Firstar Mutual Fund Services, LLC or by
calling 1-800-273-6886.
Each Fund's distributions, whether received in cash or additional shares, may be
subject to federal and state income tax. These distributions may be taxed as
ordinary income and capital gains (which may be taxed at different rates
depending on the length of time the applicable Fund holds the assets generating
the capital gains). The Leuthold Select Industries Fund expects that its
distributions will consist primarily of long-term and short-term capital gains.
The Grizzly Short Fund expects that normally its distributions will consist of
both ordinary income and short-term capital gains.
To learn more about the Leuthold Select Industries Fund and the Grizzly Short
Fund, you may want to read their Statement of Additional Information (or "SAI")
which contains additional information about the Funds. The Funds have
incorporated by reference, the SAI into the Prospectus. This means that you
should consider the contents of the SAI to be part of the Prospectus.
You also may learn more about the Funds' investments by reading the Funds'
annual and semi-annual reports to shareholders. The annual report includes a
discussion of the market conditions and investment strategies that significantly
affected the performance of the Funds during their last fiscal year.
The SAI and the annual and semi-annual reports are all available to shareholders
and prospective investors without charge, simply by calling Firstar Mutual Fund
Services, LLC at 1-800-273-6886.
Prospective investors and shareholders who have questions about Funds may also
call the following number or write to the following address.
Leuthold Funds, Inc.
100 North Sixth Street
Suite 700A
Minneapolis, MN 55403
1-888-200-0409
The general public can review and copy information about Funds (including the
SAI) at the Securities and Exchange Commission's Public Reference Room in
Washington, D.C. (Please call 1-202-942-8090 for information on the operations
of the Public Reference Room.) Reports and other information about the Funds
are also available on the EDGAR Database at the Securities and Exchange
Commission's Internet site at http://www.sec.gov and copies of this information
may be obtained, upon payment of a duplicating fee, by electronic request at the
following E-mail address: [email protected], or by writing to:
Public Reference Section
Securities and Exchange Commission
Washington, D.C. 20549-6009
Please refer to the Funds' Investment Company Act File No. 811-09094 when
seeking information about the Funds from the Securities and Exchange Commission.
EXPLANATORY NOTE
This Post-Effective Amendment No. 6 (the "Amendment") to the
Registrant's Registration Statement on Form N-1A is being filed to add the
Leuthold Select Industries Fund and the Grizzly Short Fund, each new series of
the Registrant, Leuthold Funds, Inc. This Amendment incorporates by reference in
its entirety Part A of Post-Effective Amendment No. 5 to the Registrant's
Registration Statement on Form N-1A with respect to the Leuthold Core Investment
Fund, filed with the Securities and Exchange Commission (the "SEC") on January
31, 2000, as if set forth here in full.
This Amendment also incorporates by reference in its entirety Part B
of Post-Effective Amendment No. 5 to the Registrant's Registration Statement on
Form N-1A with respect to the Leuthold Core Investment Fund, filed with the SEC
on January 31, 2000, as if set forth here in full.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION June 15, 2000
for LEUTHOLD SELECT INDUSTRIES FUND
GRIZZLY SHORT FUND
LEUTHOLD FUNDS, INC.
100 North Sixth Street
Suite 700A
Minneapolis, Minnesota 55403
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus of Leuthold Select Industries
Fund and Grizzly Short Fund dated June 15, 2000. Requests for copies of the
Prospectus should be made by writing to Leuthold Funds, Inc., 100 North Sixth
Street, Suite 700A, Minneapolis, Minnesota 55403, Attention: Corporate
Secretary, or by calling 1-800-273-6886.
<PAGE>
Leuthold Funds, Inc.
TABLE OF CONTENTS
-----------------
Page No.
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FUND HISTORY AND CLASSIFICATION...............................................1
INVESTMENT RESTRICTIONS.......................................................1
INVESTMENT CONSIDERATIONS.....................................................3
DIRECTORS AND OFFICERS OF THE CORPORATION.....................................7
OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS............................9
INVESTMENT ADVISER, ADMINISTRATOR, CUSTODIAN, TRANSFER AGENT
AND ACCOUNT SERVICES AGENT..................................................10
SERVICE PLANS................................................................13
DETERMINATION OF NET ASSET VALUE.............................................14
REDEMPTION OF SHARES.........................................................14
SYSTEMATIC WITHDRAWAL PLAN...................................................15
AUTOMATIC INVESTMENT PLAN AND TELEPHONE PURCHASES............................15
ALLOCATION OF PORTFOLIO BROKERAGE............................................16
TAXES........................................................................17
STOCKHOLDER MEETINGS.........................................................18
CAPITAL STRUCTURE............................................................19
PERFORMANCE INFORMATION......................................................20
INDEPENDENT ACCOUNTANTS......................................................21
No person has been authorized to give any information or to make any
representations other than those contained in this Statement of Additional
Information and the Prospectus dated June 15, 2000, and, if given or made, such
information or representations may not be relied upon as having been authorized
by Leuthold Funds, Inc.
This Statement of Additional Information does not constitute an offer
to sell securities.
(i)
<PAGE>
FUND HISTORY AND CLASSIFICATION
Leuthold Funds, Inc. (the "Corporation") is an open-end management
investment company consisting of three diversified portfolios, the Leuthold Core
Investment Fund, the Leuthold Select Industries Fund and the Grizzly Short Fund
(individually a "Fund" and collectively the "Funds"). This Statement of
Additional Information provides information about the Leuthold Select Industries
Fund and the Grizzly Short Fund. Leuthold Funds, Inc. is registered under the
Investment Company Act of 1940 (the "Act"). Leuthold Funds, Inc. was
incorporated as a Maryland corporation on August 30, 1995.
INVESTMENT RESTRICTIONS
The Leuthold Select Industries and the Grizzly Short Fund have adopted
the following investment restrictions which are matters of fundamental policy.
Each Fund's investment restrictions cannot be changed without approval of the
holders of the lesser of: (i) 67% of that Fund's shares present or represented
at a stockholder's meeting at which the holders of more than 50% of such shares
are present or represented; or (ii) more than 50% of the outstanding shares of
that Fund.
1. Each Fund will diversify its assets in different companies and will
not purchase securities of any issuer if, as a result of such purchase, the
Fund would own more than 10% of the outstanding voting securities of such
issuer or more than 5% of the Fund's assets would be invested in securities
of such issuer (except that up to 25% of that value of each Fund's total
assets may be invested without regard to this limitation). This restriction
does not apply to obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities.
2. Neither Fund will buy securities on margin (except for such short
term credits as are necessary for the clearance of transactions); provided,
however, that each Fund may (i) borrow money to the extent set forth in
investment restriction no. 4; (ii) purchase or sell futures contracts and
options on futures contracts; (iii) make initial and variation margin
payments in connection with purchases or sales of futures contracts or
options on futures contracts; and (iv) write or invest in put or call
options.
3. Each Fund may sell securities short and write put and call options
to the extent permitted by the Act. Neither Fund has any present intention
of writing put or call options. The Leuthold Select Industries Fund has no
present intention of selling securities short.
4. Each Fund may borrow money or issue senior securities to the extent
permitted by the Act.
5. Each Fund may pledge or hypothecate its assets to secure its
borrowings. For purposes of this investment restriction assets held in a
segregated
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<PAGE>
account or by a broker in connection with short sales effected by a Fund
are not considered to be pledged or hypothecated.
6. Neither Fund will act as an underwriter or distributor of
securities other than of its shares (except to the extent a Fund may be
deemed to be an underwriter within the meaning of the Securities Act of
1933, as amended, in the disposition of restricted securities).
7. Neither Fund will make loans, except each Fund may enter into
repurchase agreements or acquire debt securities from the issuer or others
which are publicly distributed or are of a type normally acquired by
institutional investors and except that each Fund may make loans of
portfolio securities if any such loans are secured continuously by
collateral at least equal to the market value of the securities loaned in
the form of cash and/or securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and provided that no such
loan will be made if upon the making of that loan more than 30% of the
value of the Fund's total assets would be the subject of such loans.
8. Neither Fund will concentrate 25% or more of its total assets in
securities of issuers in any one industry. This restriction does not apply
to obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.
9. Neither Fund will make investments for the purpose of exercising
control or management of any company.
10. Neither Fund will purchase or sell real estate or real estate
mortgage loans and neither Fund will make any investments in real estate
limited partnerships.
11. Neither Fund will purchase or sell commodities or commodity
contracts, except that each Fund may enter into futures contracts and
options on futures contracts. Neither Fund has any present intention of
entering into futures contracts or options on futures contracts.
12. Neither Fund will purchase or sell any interest in any oil, gas or
other mineral exploration or development program, including any oil, gas or
mineral leases.
Each Fund has adopted certain other investment restrictions which are
not fundamental policies and which may be changed by the Corporation's Board of
Directors without stockholder approval. These additional restrictions are as
follows:
1. Neither Fund will acquire or retain any security issued by a
company, an officer or director of which is an officer or director of the
Corporation or an officer, director or other affiliated person of any
Fund's investment adviser.
2
<PAGE>
2. Neither Fund will purchase illiquid securities if, as a result of
such purchase, more than 5% of the value of its total assets would be
invested in such securities.
3. Neither Fund will purchase the securities of other investment
companies except: (a) as part of a plan of merger, consolidation or
reorganization approved by the stockholders of such Fund; (b) securities of
registered open-end investment companies; or (c) securities of registered
closed-end investment companies on the open market where no commission
results, other than the usual and customary broker's commission. No
purchases described in (b) and (c) will be made if as a result of such
purchases (i) a Fund and its affiliated persons would hold more than 3% of
any class of securities, including voting securities, of any registered
investment company; (ii) more than 5% of such Fund's net assets would be
invested in shares of any one registered investment company; and (iii) more
than 25% of such Fund's net assets would be invested in shares of
registered investment companies.
The aforementioned percentage restrictions on investment or
utilization of assets refer to the percentage at the time an investment is made.
If these restrictions are adhered to at the time an investment is made, and such
percentage subsequently changes as a result of changing market values or some
similar event, no violation of a Fund's fundamental restrictions will be deemed
to have occurred. Any changes in a Fund's investment restrictions made by the
Board of Directors will be communicated to stockholders prior to their
implementation.
INVESTMENT CONSIDERATIONS
The prospectus for the Leuthold Select Industries Fund and the Grizzly
Short Fund describe their principal investment strategies and risks. This
section expands upon that discussion and also discusses non-principal investment
strategies and risks.
Money Market Instruments
The money market instruments in which the Funds may invest include
conservative fixed-income securities, such as U.S. Treasury Bills, commercial
paper rated A-1 by Standard & Poor's Corporation ("S&P"), or Prime-1 by Moody's
Investors Service, Inc. ("Moody's"), commercial paper master notes and
repurchase agreements. Commercial paper master notes are unsecured promissory
notes issued by corporations to finance short-term credit needs. They permit a
series of short-term borrowings under a single note. Borrowings under commercial
paper master notes are payable in whole or in part at any time upon demand, may
be prepaid in whole or in part at any time, and bear interest at rates which are
fixed to known lending rates and automatically adjusted when such known lending
rates change. There is no secondary market for commercial paper master notes.
The Funds' investment adviser will monitor the creditworthiness of the issuer of
the commercial paper master notes while any borrowings are outstanding.
3
<PAGE>
Repurchase agreements are agreements under which the seller of a
security agrees at the time of sale to repurchase the security at an agreed time
and price. Neither Fund will enter into repurchase agreements with entities
other than banks or invest over 5% of its net assets in repurchase agreements
with maturities of more than seven days. If a seller of a repurchase agreement
defaults and does not repurchase the security subject to the agreement, the Fund
will look to the collateral security underlying the seller's repurchase
agreement, including the securities subject to the repurchase agreement, for
satisfaction of the seller's obligation to the Fund. In such event, the Fund
might incur disposition costs in liquidating the collateral and might suffer a
loss if the value of the collateral declines. In addition, if bankruptcy
proceedings are instituted against a seller of a repurchase agreement,
realization upon the collateral may be delayed or limited.
Foreign Securities
The Leuthold Select Industries Fund may invest in securities of
foreign issuers traded in the U.S. securities markets, either directly or
through American Depository Receipts ("ADRs"). Investments in foreign securities
involve special risks and considerations that are not present when the Fund
invests in domestic securities. The Grizzly Short Fund may sell short ADRs.
There is often less information publicly available about a foreign
issuer than about a U.S. issuer. Foreign issuers generally are not subject to
accounting, auditing and financial reporting standards and practices comparable
to those in the United States.
ADR facilities may be either "sponsored" or "unsponsored." While
similar, distinctions exist relating to the rights and duties of ADR holders and
market practices. A depository may establish an unsponsored facility without the
participation by or consent of the issuer of the deposited securities, although
a letter of non-objection from the issuer is often requested. Holders of
unsponsored ADRs generally bear all the costs of such facility, which can
include deposit and withdrawal fees, currency conversion fees and other service
fees. The depository of an unsponsored facility may be under no duty to
distribute shareholder communications from the issuer or pass through voting
rights. Issuers of unsponsored ADRs are not obligated to disclose material
information in the U.S. and, therefore, there may not be a correlation between
such information and the market value of the ADR. Sponsored facilities enter
into an agreement with the issuer that sets out rights and duties of the issuer,
the depository and the ADR holder. This agreement also allocates fees among the
parties. Most sponsored agreements also provide that the depository will
distribute shareholder notices, voting instruments and other communications. The
Leuthold Select Industries Fund may invest in sponsored and unsponsored ADRs and
the Grizzly Short Fund may sell short sponsored and unsponsored ADRs.
Short Sales
The Grizzly Short Fund will seek to realize additional gains through
effecting short sales of securities. Short selling involves the sale of borrowed
securities. At the time a short sale is effected, the Fund incurs an obligation
to replace the security borrowed at
4
<PAGE>
whatever its price may be at the time the Fund purchases it for delivery to the
lender. The price at such time may be more or less than the price at which the
security was sold by the Fund. Until the security is replaced, the Fund is
required to pay the lender amounts equal to any dividend or interest which
accrue during the period of the loan. To borrow the security, the Fund also may
be required to pay a premium, which would increase the cost of the security
sold. The proceeds of the short sale will be retained by the broker, to the
extent necessary to meet margin requirements, until the short position is
closed. Until the Grizzly Short Fund closes its short position or replaces the
borrowed security, the Fund will: (a) maintain cash or liquid securities at such
a level that the amount so maintained plus the amount deposited with the broker
as collateral will equal the current value of the security sold short; or (b)
otherwise cover the Fund's short position.
Registered Investment Companies
Each Fund may invest up to 25% of its net assets in shares of
registered investment companies. Neither Fund will purchase or otherwise acquire
shares of any registered investment company (except as part of a plan of merger,
consolidation or reorganization approved by the stockholders of the Fund) if (a)
that Fund and its affiliated persons would own more than 3% of any class of
securities of such registered investment company or (b) more than 5% of its net
assets would be invested in the shares of any one registered investment company.
If a Fund purchases more than 1% of any class of security of a registered
open-end investment company, such investment will be considered an illiquid
investment.
Any investment in a registered investment company involves investment
risk. Additionally an investor could invest directly in the registered
investment companies in which the Funds invest. By investing indirectly through
a Fund, an investor bears not only his or her proportionate share of the
expenses of the Fund (including operating costs and investment advisory fees)
but also indirect similar expenses of the registered investment companies in
which the Fund invests. An investor may also indirectly bear expenses paid by
registered investment companies in which a Fund invests related to the
distribution of such registered investment company's shares.
Under certain circumstances an open-end investment company in which a
Fund invests may determine to make payment of a redemption by the Fund (wholly
or in part) by a distribution in kind of securities from its portfolio, instead
of in cash. As a result, the Fund may hold such securities until its investment
adviser determines it appropriate to dispose of them. Such disposition will
impose additional costs on the Fund.
Investment decisions by the investment advisers to the registered
investment companies in which the Funds invest are made independently of the
Funds and their investment adviser. At any particular time, one registered
investment company in which a Fund invests may be purchasing shares of an issuer
whose shares are being sold by another registered investment company in which
the Fund invests. As a result, the Fund would incur certain transactional costs
without accomplishing any investment purpose.
5
<PAGE>
Illiquid Securities
Each Fund may invest up to 5% of its net assets in securities for
which there is no readily available market ("illiquid securities"). The 5%
limitation includes securities whose disposition would be subject to legal
restrictions ("restricted securities"). Illiquid and restricted securities often
have a market value lower than the market price of unrestricted securities of
the same issuer and are not readily marketable without some time delay. This
could result in a Fund being unable to realize a favorable price upon
disposition of such securities and in some cases might make disposition of such
securities at the time desired by the Fund impossible.
Lending Portfolio Securities
In order to generate additional income, each Fund may lend portfolio
securities constituting up to 30% of its total assets to unaffiliated
broker-dealers, banks or other recognized institutional borrowers of securities,
provided that the borrower at all times maintains cash, U.S. government
securities or equivalent collateral or provides an irrevocable letter of credit
in favor of the Fund equal in value to at least 100% of the value of the
securities loaned. During the time portfolio securities are on loan, the
borrower pays the lending Fund an amount equivalent to any dividends or interest
paid on such securities, and the Fund may receive an agreed-upon amount of
interest income from the borrower who delivered equivalent collateral or
provided a letter of credit. Loans are subject to termination at the option of
the lending Fund or the borrower. The lending Fund may pay reasonable
administrative and custodial fees in connection with a loan of portfolio
securities and may pay a negotiated portion of the interest earned on the cash
or equivalent collateral to the borrower or placing broker. The lending Fund
does not have the right to vote securities on loan, but could terminate the loan
and regain the right to vote if that were considered important with respect to
the investment.
The primary risk in securities lending is a default by the borrower
during a sharp rise in price of the borrowed security resulting in a deficiency
in the collateral posted by the borrower. The Funds will seek to minimize this
risk by requiring that the value of the securities loaned will be computed each
day and additional collateral be furnished each day if required.
Borrowing
Each Fund is authorized to borrow money from banks but may not borrow
money for investment purposes. Neither Fund will purchase any portfolio
securities or effect short sales while any borrowed amounts remain outstanding.
Typically, if a Fund borrows money, it will be for the purpose of facilitating
portfolio management by enabling the Fund to meet redemption requests when the
liquidation of portfolio investments would be inconvenient or disadvantageous.
If a Fund's borrowing exceeds 5% of its net assets or if not repaid within sixty
days, it must maintain asset coverage (total assets less liabilities exclusive
of borrowings) of 300% of all amounts borrowed. If, at any time, the value of a
Fund's assets should fail to meet this 300% coverage test, the Fund within three
business days will reduce the amount of
6
<PAGE>
the Fund's borrowings to the extent necessary to meet this 300% coverage.
Maintenance of this percentage limitation may result in the sale of portfolio
securities at a time when investment considerations otherwise indicate that it
would be disadvantageous to do so.
Portfolio Turnover
Each Fund's annual portfolio turnover rate indicates changes in the
Fund's portfolio and is calculated by dividing the lesser of purchases or sales
of securities (excluding securities having maturities at acquisition of one year
or less) for the fiscal year by the monthly average of the value of the
portfolio securities (excluding securities having maturities at acquisition of
one year or less) owned by the Fund during the fiscal year. Both the Leuthold
Select Industries Fund and the Grizzly Short Fund anticipate that their annual
portfolio turnover rates will exceed 100%.
DIRECTORS AND OFFICERS OF THE CORPORATION
As a Maryland corporation, the business and affairs of the Corporation
are managed by its officers under the direction of its Board of Directors. The
name, age, address, principal occupation(s) during the past five years, and
other information with respect to each of the directors and officers of the
Corporation are as follows:
*Steven C. Leuthold -- Director, President and Treasurer. Mr.
Leuthold, 62, is the chief executive officer of the managing member of Leuthold
Weeden Capital Management, LLC (the "Adviser"). He has also been a Portfolio
Manager for the predecessors to the Adviser, Leuthold & Anderson, Inc. (since
1987) and Leuthold, Weeden & Associates, L.P. (since 1991), and Chairman of The
Leuthold Group since November, 1981. Mr. Leuthold graduated from the University
of Minnesota with a B.S. in History in 1960. His address is c/o Leuthold Weeden
Capital Management, LLC, 100 North Sixth Street, Suite 700A, Minneapolis, MN
55403.
*Charles D. Zender -- Director. Mr. Zender, 54, has been Managing
Director of The Leuthold Group since January, 1991. Prior to such time, he
served as a marketing/sales executive of The Leuthold Group since May, 1988. Mr.
Zender graduated from the University of Northern Iowa with a B.A. in
Accounting/Business Administration in 1970. His address is c/o Leuthold Weeden
Capital Management, LLC, 100 North Sixth Street, Suite 700A, Minneapolis, MN
55403.
John S. Chipman -- Director. Mr. Chipman, 73, has been Regent's
Professor of Economics at the University of Minnesota since 1981. He was a Guest
Professor at the University of Konstanz, Germany from 1986 to 1991 and was
awarded an honorary doctorate from such institution in 1991. Mr. Chipman
received his Ph.D. in Economics from Johns Hopkins University in 1950. His
address is c/o Leuthold Weeden Capital Management, LLC, 100 North Sixth Street,
Suite 700A, Minneapolis, MN 55403.
- ---------------
*Messrs. Leuthold and Zender are "interested persons" of the Corporation (as
defined in the Act).
3
<PAGE>
Lawrence L. Horsch -- Director. Mr. Horsch, 65, has been a member of
the Board of Directors of Boston Scientific Corp., a public company engaged in
developing, producing and marketing medical devices, since February, 1995, when
SCIMED Life Systems, Inc., a medical products company he helped organize in
1971, merged with Boston Scientific Corp. Prior to such merger, Mr. Horsch
served in various capacities with SCIMED. Life Systems, Inc., including Acting
Chief Financial Officer from 1994 to 1995, Chairman of the Board from 1977 to
1994, and as a director from 1977 to 1995. He has also served as Chairman of
Eagle Management & Financial Corp., a management consulting firm, since 1990.
Mr. Horsch attended the College of St. Thomas and Northwestern University, where
he received an M.B.A. in Finance in 1958. His address is c/o Leuthold Weeden
Capital Management, LLC, 100 North Sixth Street, Suite 700A, Minneapolis, MN
55403.
Paul M. Kelnberger -- Director. Mr. Kelnberger, 56, joined Johnson,
West & Co., PLC, a public accounting firm, in 1969 and has been a partner since
1975. He is also a director of Video Update, Inc., a public company engaged in
owning, operating and franchising video rental superstores. Mr. Kelnberger is a
Certified Public Accountant (CPA). His address is c/o Johnson, West & Co., PLC,
336 Robert Street North, Suite 1400, St. Paul, MN 55101.
Edward C. Favreau - Vice President. Mr. Favreau, 48, has been Manager
of Marketing and Sales of the Adviser since July, 1999. Prior to joining the
Adviser, Mr. Favreau served as Vice President and Sales Manager of U.S. Bancorp
Investments Inc. (formerly First Bank Investment Services) from June, 1993 until
July, 1999. Prior to that time Mr. Favreau served in various capacities for U.S.
Bank from July, 1988 until June, 1993. Mr. Favreau graduated from Mankato State
University with a B.S. in Business Administration in 1977. His address is c/o
Leuthold Weeden Capital Management, LLC, 100 North Sixth Street, Suite 700A,
Minneapolis, MN 55403.
David R. Cragg - Vice President and Secretary. Mr. Cragg, 31, has been
Manager of Compliance of the Adviser since January, 1999. Prior to joining the
Adviser, Mr. Cragg served as Operations Manager of Piper Trust Company from
November, 1997 until January, 1999. Prior to that time, Mr. Cragg served in
various capacities for Piper Trust Company from February, 1993 until November,
1997. Mr. Cragg graduated from Westmont College in 1991 with a B.A. in
Economics. His address is c/o Leuthold Weeden Capital Management, LLC, 100 North
Sixth Street, Suite 700A, Minneapolis, MN 55403.
The Corporation's standard method of compensating directors is to pay
each director who is not an interested person of the Corporation a fee of $500
for each meeting of the Board of Directors attended. The Corporation also may
reimburse its directors for travel expenses incurred in order to attend meetings
of the Board of Directors.
The table below sets forth the compensation paid by the Corporation to
each of the directors of the Corporation during the fiscal year ended September
30, 1999:
8
<PAGE>
<TABLE>
COMPENSATION TABLE
<CAPTION>
Total
Compensation
Estimated from Corporation
Aggregate Pension or Retirement Annual and Fund
Name of Compensation Benefits Accrued As Benefits Upon Complex Paid to
Person from Corporation Part of Fund Expenses Retirement Directors
------ ---------------- --------------------- ---------- ---------
<S> <C> <C> <C> <C>
Steven C. Leuthold $0 $0 $0 $0
Charles D. Zender $0 $0 $0 $0
John S. Chipman $2,000 $0 $0 $2,000
Lawrence L. Horsch $2,000 $0 $0 $2,000
Paul M. Kelnberger $2,000 $0 $0 $2,000
</TABLE>
The Corporation and the Adviser have adopted a code of ethics pursuant
to Rule 17j-1 under the Act. This code of ethics permits personnel subject
thereto to invest in securities, including securities that may be purchased or
held by a Fund. This code of ethics prohibits, among other things, persons
subject thereto from purchasing or selling securities if they know at the time
of such purchase or sale that the security is being considered for purchase or
sale by a Fund or is being purchased or sold by a Fund.
OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
Set forth below are the names and addresses of all holders of the
shares of the Leuthold Core Investment Fund who as of February 29, 2000 owned of
record, or to the knowledge of the Corporation, beneficially owned, more than 5%
of such Fund's then outstanding shares, as well as the number of shares of such
Fund beneficially owned by all officers and directors of the Corporation as a
group. (The Leuthold Select Industries Fund and Grizzly Short Fund will commence
operations on June 15, 2000.)
Name and Address
of Beneficial Owner Number of Shares Percent of Class
------------------- ---------------- ----------------
Charles Schwab & Co., Inc. (1)
101 Montgomery Street
San Francisco, CA 94104-4122 886,771 15.00%
National Investor Services Corp. (1)
55 Water Street
32nd Floor
New York, NY 10041-3299 470,652 7.96%
9
<PAGE>
Name and Address
of Beneficial Owner Number of Shares Percent of Class
------------------- ---------------- ----------------
Fidelity Investments (1)
Institutional Operations Co.
100 Magellan Way
Covington, KY 41015-1987 428,569 7.25%
American Express Trust Company, Trustee
Gray, Plant, Mooty, Mooty & Bennett
Retirement Savings Plan
33 South Sixth Street
Suite 3400
Minneapolis, MN 55402-3796 415,804 7.03%
Donaldson, Lufkin & Jenrette Securities
Corporation
Attn: Mutual Funds
P. O. Box 2052
Jersey City, NJ 07303-2052
412,657 6.98%
Officers and Directors as a Group (8 persons) 136,007(2)(3) 2.30%
- --------------------------
(1) The shares held by Charles Schwab & Co., Inc., National Investor
Services Corp., Fidelity Investments and Donaldson, Lufkin & Jenrette
Securities Corporation were owned of record only.
(2) Includes 16,822 shares held in the Leuthold & Anderson, Inc.
Retirement Plan.
(3) Includes 79,016 shares held by the Steven Leuthold Trust, for which
Albert Andrews, Jr. serves as sole trustee, and 13,932 shares held by
the Steven C. Leuthold Family Foundation, a charitable trust
controlled by Steven C. Leuthold.
INVESTMENT ADVISER, ADMINISTRATOR, CUSTODIAN,
TRANSFER AGENT AND ACCOUNT SERVICES AGENT
The Adviser
The investment adviser to each Fund is Leuthold Weeden Capital
Management, LLC, 100 North Sixth Street, Suite 700A, Minneapolis, Minnesota
55403 (the "Adviser"). Pursuant to the investment advisory agreements entered
into between the Corporation and the Adviser with respect to each Fund (the
"Advisory Agreements"), the Adviser furnishes continuous investment advisory
services to the Funds. The Adviser is controlled by Steven C. Leuthold who is
the chief executive officer and the principal shareholder of the managing member
of the Adviser. The Adviser supervises and manages the investment portfolio of
each Fund and, subject to such policies as the Board of Directors of the
Corporation may determine, directs the purchase or sale of investment securities
in the day-to-day management of each Fund's investment portfolio. Under the
Advisory Agreements, the Adviser, at its own
10
<PAGE>
expense and without reimbursement from the Funds, furnishes office space and all
necessary office facilities, equipment and executive personnel for managing the
investments of the Funds and pays salaries and fees of all officers and
directors of the Corporation (except the fees paid to directors who are not
interested persons of the Adviser).
Each Fund pays all of its expenses not assumed by the Adviser
including, but not limited to, the costs of preparing and printing its
registration statements required under the Securities Act of 1933 and the Act
and any amendments thereto, the expenses of registering its shares with the
Securities and Exchange Commission and in the various states, the printing and
distribution cost of prospectuses mailed to existing stockholders, the cost of
director and officer liability insurance, reports to stockholders, reports to
government authorities and proxy statements, interest charges, brokerage
commissions, and expenses incurred in connection with portfolio transactions.
Each Fund also pays the fees of directors who are not officers of the
Corporation, salaries of administrative and clerical personnel, association
membership dues, auditing and accounting services, fees and expenses of any
custodian or trustees having custody of assets of the Funds, expenses of
calculating the net asset value and repurchasing and redeeming shares, and
charges and expenses of dividend disbursing agents, registrars, and share
transfer agents, including the cost of keeping all necessary stockholder records
and accounts and handling any problems relating thereto.
The Adviser has undertaken to reimburse each Fund to the extent that
the aggregate annual operating expenses, including the investment advisory fee
and the administration fee but excluding interest, reimbursement payments to
securities lenders for dividend and interest payments on securities sold short,
taxes, brokerage commissions and other costs incurred in connection with the
purchase or sale of portfolio securities, and extraordinary items, exceed 1.95%
of the average net assets of the Leuthold Select Industries Fund and 2.50% of
the average net assets of the Grizzly Short Fund for such year, as determined by
valuations made as of the close of each business day of the year. Each Fund
monitors its expense ratio on a monthly basis. If the accrued amount of the
expenses of a Fund exceeds the applicable expense limitation, the Fund creates
an account receivable from the Adviser for the amount of such excess. In such a
situation the monthly payment of the Adviser's fee will be reduced by the amount
of such excess (and if the amount of such excess in any month is greater than
the monthly payment of the Adviser's fee, the Adviser will pay the Fund the
amount of such difference), subject to adjustment month by month during the
balance of the Fund's fiscal year if accrued expenses thereafter fall below this
limit. If, in any of the three fiscal years following any fiscal year in which
the Adviser has reimbursed a Fund for excess expenses, such Fund's expenses, as
a percentage of such Fund's average net assets, are less than the applicable
expense ratio limit, such Fund shall repay to the Adviser the amount the Adviser
reimbursed the Fund; provided, however, that the Fund's expense ratio shall not
exceed the applicable limit.
Each Advisory Agreement will remain in effect as long as its
continuance is specifically approved at least annually (i) by the Board of
Directors of the Corporation or by the vote of a majority (as defined in the
Act) of the outstanding shares of the applicable Fund, and (ii) by the vote of a
majority of the directors of the Corporation who are not parties to the Advisory
Agreement or interested persons of the Adviser, cast in person at a meeting
called
11
<PAGE>
for the purpose of voting on such approval. Each Advisory Agreement provides
that it may be terminated at any time without the payment of any penalty, by the
Board of Directors of the Corporation or by vote of the majority of the
applicable Fund's stockholders on sixty (60) days' written notice to the
Adviser, and by the Adviser on the same notice to the Corporation, and that it
shall be automatically terminated if it is assigned.
Each Advisory Agreement provides that the Adviser shall not be liable
to the Corporation or its stockholders for anything other than willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties. Each Advisory Agreement also provides that the Adviser
and its officers, directors and employees may engage in other businesses, devote
time and attention to any other business whether of a similar or dissimilar
nature, and render services to others.
The Administrator
The administrator to the Corporation is Firstar Mutual Fund Services,
LLC, 615 East Michigan Street, Milwaukee, Wisconsin 53202 (the "Administrator").
Pursuant to separate Fund Administration Servicing Agreements entered into
between the Corporation and the Administrator relating to each Fund (the
"Administration Agreements"), the Administrator prepares and maintains the
books, accounts and other documents required by the Act, responds to stockholder
inquiries, prepares each Fund's financial statements and tax returns, prepares
certain reports and filings with the SEC and with state blue sky authorities,
furnishes statistical and research data, clerical, accounting and bookkeeping
services and stationery and office supplies, keeps and maintains each Fund's
financial and accounting records and generally assists in all aspects of each
Fund's operations. The Administrator, at its own expense and without
reimbursement from the Funds, furnishes office space and all necessary office
facilities, equipment and executive personnel for performing the services
required to be performed by it under the Administration Agreements. For the
foregoing, the Administrator receives from each Fund a fee, paid monthly at an
annual rate of .07% of the first $200,000,000 of the Fund's average net assets,
.06% of the next $500,000,000 of the Fund's average net assets, and .04% of the
Fund's average net assets in excess of $700,000,000. Notwithstanding the
foregoing, the minimum annual fee payable to the Administrator is $25,000 for
the Leuthold Select Industries Fund and $35,000 for the Grizzly Short Fund.
Each Administration Agreement will remain in effect until terminated
by either party. The Administration Agreements may be terminated at any time,
without the payment of any penalty, by the Board of Directors of the Corporation
upon the giving of ninety (90) days' written notice to the Administrator, or by
the Administrator upon the giving of ninety (90) days' written notice to the
Corporation.
Under the Administration Agreements, the Administrator shall exercise
reasonable care and is not liable for any error or judgment or mistake of law or
for any loss suffered by the Corporation in connection with its performance
under the Administration Agreements, except a loss resulting from willful
misfeasance, bad faith or negligence on the part of the Administrator in the
performance of its duties under the Administration Agreements.
12
<PAGE>
The Custodian
Firstar Bank, N.A., an affiliate of Firstar Mutual Fund Services, LLC,
serves as custodian of the Corporation's assets pursuant to Custody Agreements.
Under the Custody Agreements, Firstar Bank, N.A. has agreed to (i) maintain a
separate account in the name of each Fund, (ii) make receipts and disbursements
of money on behalf of each Fund, (iii) collect and receive all income and other
payments and distributions on account of each Fund's portfolio investments, (iv)
respond to correspondence from stockholders, security brokers and others
relating to its duties, and (v) make periodic reports to each Fund concerning
each Fund's operations. Firstar Bank, N.A. does not exercise any supervisory
function over the purchase and sale of securities.
The Transfer Agent
Firstar Mutual Fund Services, LLC serves as transfer agent and
dividend disbursing agent for the Funds under a Shareholder Servicing Agent
Agreement. As transfer and dividend disbursing agent, Firstar Mutual Fund
Services, LLC has agreed to (i) issue and redeem shares of each Fund, (ii) make
dividend and other distributions to stockholders of each Fund, (iii) respond to
correspondence by Fund stockholders and others relating to its duties, (iv)
maintain stockholder accounts, and (v) make periodic reports to each Fund.
The Accounting Servicing Agent
In addition the Corporation has entered into separate Fund Accounting
Servicing Agreements with Firstar Mutual Fund Services, LLC relating to each
Fund pursuant to which Firstar Mutual Fund Services, LLC has agreed to maintain
the financial accounts and records of each Fund and provide other accounting
services to the Funds. For its accounting services, Firstar Mutual Fund
Services, LLC is entitled to receive fees, payable monthly, (i) from the
Leuthold Select Industries Fund based on the total annual rate of $30,000 for
the first $100 million of average net assets, .0125% on the next $200 million of
average net assets, and .0075% on average net assets exceeding $300 million; and
(ii) from the Grizzly Short Fund based on the total annual rate of $39,000 for
the first $100 million of average net assets, .02% on the next $200 million of
average net assets, and .01% on average net assets in excess of $300 million.
Firstar Mutual Fund Services, LLC is also entitled to certain out of pocket
expenses, including pricing expenses.
SERVICE PLANS
Each of the Funds has adopted a service plan pursuant to which it may
pay fees of up to 0.25% of its average daily net assets to broker-dealers,
financial institutions or other service providers that provide services to
investors in the Funds. Payments under these plans are authorized by the
officers of the Corporation.
The service plan may be terminated by a Fund at any time upon a vote
of the directors of the Corporation who are not interested persons of the
Corporation and who have no direct or financial interest in the plans and will
be terminated if its continuance is not approved at least annually by such
directors.
13
<PAGE>
The Board of Directors reviews quarterly the amount and purposes of
expenditures pursuant to the service plans as reported to it by the officers of
the Corporation.
DETERMINATION OF NET ASSET VALUE
The net asset value of each Fund is determined as of the close of
regular trading (currently 4:00 p.m. Eastern time) on each day the New York
Stock Exchange is open for trading. The New York Stock Exchange is open for
trading Monday through Friday except New Year's Day, Dr. Martin Luther King, Jr.
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Additionally, when any of the aforementioned
holidays falls on a Saturday, the New York Stock Exchange will not be open for
trading on the preceding Friday and when any such holiday falls on a Sunday, the
New York Stock Exchange will not be open for trading on the succeeding Monday,
unless unusual business conditions exist, such as the ending of a monthly or the
yearly accounting period. The New York Stock Exchange also may be closed on
national days of mourning.
Common stocks that are listed on a securities exchange are valued at
the last quoted sales price on the day the valuation is made. Price information
on listed stocks is taken from the exchange where the security is primarily
traded. Securities which are listed on an exchange but which are not traded on
the valuation date are valued at the most recent bid prices. Securities sold
short which are listed on an exchange but which are not traded on the valuation
date are valued at the average of the current bid and asked prices. Unlisted
securities for which market quotations are readily available are valued at the
latest quoted bid price. Securities sold short which are not listed on an
exchange but for which market quotations are readily available are valued at
average of the current bid and asked prices. Other assets, including investments
in open-end investment companies, and securities for which no quotations are
readily available are valued at fair value as determined in good faith by the
Directors. Short-term instruments (those with remaining maturities of 60 days or
less) are valued at amortized cost, which approximates market.
The Funds have adopted procedures pursuant to Rule 17a-7 under the
Investment Company Act of 1940 pursuant to which the Funds may effect a purchase
and sale transaction between Funds, with an affiliated person of the Funds (or
an affiliated person of such an affiliated person) in which a Fund issues its
shares in exchange for securities of a type which are permitted investments for
such Fund. For purposes of determining the number of shares to be issued, the
securities to be exchanged will be valued in accordance with the requirements of
Rule 17a-7.
REDEMPTION OF SHARES
The Funds reserve the right to suspend or postpone redemptions during
any period when: (a) trading on the New York Stock Exchange is restricted, as
determined by the Securities and Exchange Commission, or that the Exchange is
closed for other than customary weekend and holiday closings; (b) the Securities
and Exchange Commission has by order permitted such suspension; (c) an
emergency, as determined by the Securities and Exchange
14
<PAGE>
Commission, exists, making disposal of portfolio securities or valuation of net
assets of the Funds not reasonably practicable.
SYSTEMATIC WITHDRAWAL PLAN
An investor who owns shares of any Fund worth at least $10,000 at the
current net asset value may, by completing an application which may be obtained
from the Funds or Firstar Mutual Fund Services, LLC, create a Systematic
Withdrawal Plan from which a fixed sum will be paid to the investor at regular
intervals. To establish the Systematic Withdrawal Plan, the investor deposits
Fund shares with the Corporation and appoints it as agent to effect redemptions
of Fund shares held in the account for the purpose of making monthly or
quarterly withdrawal payments of a fixed amount to the investor out of the
account. Fund shares deposited by the investor in the account need not be
endorsed or accompanied by a stock power if registered in the same name as the
account; otherwise, a properly executed endorsement or stock power, obtained
from any bank, broker-dealer or the Corporation is required. The investor's
signature should be guaranteed by a bank, a member firm of a national stock
exchange or other eligible guarantor.
The minimum amount of a withdrawal payment is $100. These payments
will be made from the proceeds of periodic redemptions of shares in the account
at net asset value. Redemptions will be made in accordance with the schedule
(e.g., monthly, bimonthly [every other month], quarterly or yearly, but in no
event more than monthly) selected by the investor. If a scheduled redemption day
is a weekend day or a holiday, such redemption will be made on the next
preceding business day. Establishment of a Systematic Withdrawal Plan
constitutes an election by the investor to reinvest in additional Fund shares,
at net asset value, all income dividends and capital gains distributions payable
by the Fund on shares held in such account, and shares so acquired will be added
to such account. The investor may deposit additional Fund shares in his account
at any time.
Withdrawal payments cannot be considered as yield or income on the
investor's investment, since portions of each payment will normally consist of a
return of capital. Depending on the size or the frequency of the disbursements
requested, and the fluctuation in the value of the Fund's portfolio, redemptions
for the purpose of making such disbursements may reduce or even exhaust the
investor's account.
The investor may vary the amount or frequency of withdrawal payments,
temporarily discontinue them, or change the designated payee or payee's address,
by notifying Firstar Mutual Fund Services, LLC in writing thirty (30) days prior
to the next payment.
AUTOMATIC INVESTMENT PLAN AND TELEPHONE PURCHASES
The Funds offer an automatic investment option pursuant to which money
will be moved from a stockholder's bank account to the stockholder's Fund
account on the schedule (e.g., monthly, bimonthly [every other month], quarterly
or yearly) the stockholder selects. The minimum transaction amount is $50.
15
<PAGE>
The Funds offer a telephone purchase option pursuant to which money
will be moved from the stockholder's bank account to the stockholder's Fund
account upon request. Only bank accounts held at domestic financial institutions
that are automated Clearing House (ACH) members can be used for telephone
transactions. To have Fund shares purchased at the net asset value determined as
of the close of regular trading on a given date, Firstar Mutual Fund Services,
LLC must receive both the purchase order and payment by Electronic Funds
Transfer through the ACH System before the close of regular trading on such
date. Most transfers are completed within 3 business days. The minimum amount
that can be transferred by telephone is $100.
ALLOCATION OF PORTFOLIO BROKERAGE
Each Fund's securities trading and brokerage policies and procedures
are reviewed by and subject to the supervision of the Corporation's Board of
Directors. Decisions to buy and sell securities for each Fund are made by the
Adviser subject to review by the Corporation's Board of Directors. In placing
purchase and sale orders for portfolio securities for each Fund, it is the
policy of the Adviser to seek the best execution of orders at the most favorable
price in light of the overall quality of brokerage and research services
provided, as described in this and the following paragraphs. Many of these
transactions involve payment of a brokerage commission by a Fund. In some cases,
transactions are with firms who act as principals for their own accounts. In
selecting brokers to effect portfolio transactions, the determination of what is
expected to result in best execution at the most favorable price involves a
number of largely judgmental considerations. Among these are the Adviser's
evaluation of the broker's efficiency in executing and clearing transactions,
block trading capability (including the broker's willingness to position
securities) and the broker's reputation, financial strength and stability. The
most favorable price to a Fund means the best net price without regard to the
mix between purchase or sale price and commission, if any. Over-the-counter
securities may be purchased and sold directly with principal market makers who
retain the difference in their cost in the security and its selling price. In
some instances, the Adviser feels that better prices are available from
non-principal market makers who are paid commissions directly. Although the
Funds do not initially intend to market their shares through intermediary
broker-dealers, each Fund may place portfolio orders with broker-dealers who
recommend the purchase of Fund shares to clients (if the Adviser believes the
commissions and transaction quality are comparable to that available from other
brokers) and may allocate portfolio brokerage on that basis.
The Adviser may allocate brokerage to Weeden & Co., L.P. ("Weeden")
but only if the Adviser reasonably believes the commission and transaction
quality are comparable to that available from other qualified brokers. Steven C.
Leuthold is a limited partner of Weeden. Weeden's institutional investment
research division is designated The Leuthold Group, in which Steven C. Leuthold
has a separate 50% pecuniary interest. An affiliate of Weeden, Weeden Investors,
L.P., owns 10% of the membership interests of the Adviser. Under the Act, Weeden
is prohibited from dealing with the Fund as a principal in the purchase and sale
of securities. Weeden, when acting as a broker for the Fund in any of its
portfolio transactions executed on a securities exchange of which Weeden is a
member, will act in
16
<PAGE>
accordance with the requirements of Section 11(a) of the Securities Exchange Act
of 1934 and the rules of such exchanges.
In allocating brokerage business for each Fund, the Adviser also takes
into consideration the research, analytical, statistical and other information
and services provided by the broker, such as general economic reports and
information, reports or analyses of particular companies or industry groups,
market timing and technical information, and the availability of the brokerage
firm's analysts for consultation. While the Adviser believes these services have
substantial value, they are considered supplemental to the Adviser's own efforts
in the performance of its duties under the Advisory Agreements. Other clients of
the Adviser may indirectly benefit from the availability of these services to
the Adviser, and the Funds may indirectly benefit from services available to the
Adviser as a result of transactions for other clients. The Advisory Agreements
provide that the Adviser may cause the Funds to pay a broker which provides
brokerage and research services to the Adviser a commission for effecting a
securities transaction in excess of the amount another broker would have charged
for effecting the transaction, if the Adviser determines in good faith that such
amount of commission is reasonable in relation to the value of brokerage and
research services provided by the executing broker viewed in terms of either the
particular transaction or the Adviser's overall responsibilities with respect to
the Funds and the other accounts as to which he exercises investment discretion.
Weeden will not receive higher commissions because of research services
provided.
TAXES
Each Fund annually will endeavor to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended. If
a Fund fails to qualify as a regulated investment company under Subchapter M in
any fiscal year, it will be treated as a corporation for federal income tax
purposes. As such the Fund would be required to pay income taxes on its net
investment income and net realized capital gains, if any, at the rates generally
applicable to corporations. Stockholders of that Fund would not be liable for
income tax on the Fund's net investment income or net realized capital gains in
their individual capacities. Distributions to stockholders, whether from that
Fund's net investment income or net realized capital gains, would be treated as
taxable dividends to the extent of current or accumulated earnings and profits
of the Fund.
Dividends from a Fund's net investment income and distributions from a
Fund's net realized short-term capital gains are taxable to stockholders as
ordinary income, whereas distributions from a Fund's net realized long-term
capital gains are taxable as long-term capital gain regardless of the
stockholder's holding period for the shares. Such dividends and distributions
are taxable to stockholders whether received in cash or in additional shares.
The 70% dividends-received deduction for corporations will apply to dividends
from a Fund's net investment income, subject to proportionate reductions if the
aggregate dividends received by that Fund from domestic corporations in any year
are less than 100% of the net investment company taxable income distributions
made by the Fund. Gains on short sales generally are treated as short-term
capital gains.
17
<PAGE>
Any dividend or capital gains distribution paid shortly after a
purchase of Fund shares will have the effect of reducing the per share net asset
value of such shares by the amount of the dividend or distribution. Furthermore,
if the net asset value of Fund shares immediately after a dividend or
distribution is less than the cost of such shares to the stockholder, the
dividend or distribution will be taxable to the stockholder even though it
results in a return of capital to him.
Redemption of shares will generally result in a capital gain or loss
for income tax purposes. Such capital gain or loss will be long term or short
term, depending upon the holding period. However, if a loss is realized on
shares held for six months or less, and the investor received a distribution of
net long-term capital gains during that period, then such loss is treated as a
long-term capital loss to the extent of the capital gain distribution received.
Each Fund may be required to withhold Federal income tax at a rate of
31% ("backup withholding") from dividend payments and redemption proceeds if a
stockholder fails to furnish the Fund with his social security or other tax
identification number and certify under penalty of perjury that such number is
correct and that such stockholder is not subject to backup withholding due to
the underreporting of income. The certification form is included as part of the
Purchase Application and should be completed when the account is opened.
This section is not intended to be a complete discussion of present or
proposed federal income tax laws and the effect of such laws on an investor.
Investors are urged to consult with their respective tax advisers for a complete
review of the tax ramifications of an investment in the Funds.
STOCKHOLDER MEETINGS
The Maryland General Corporation Law permits registered investment
companies, such as the Corporation, to operate without an annual meeting of
stockholders under specified circumstances if an annual meeting is not required
by the Act. The Corporation has adopted the appropriate provisions in its Bylaws
and may, at its discretion, not hold an annual meeting in any year in which the
election of directors is not required to be acted on by stockholders under the
Act.
The Corporation's Bylaws also contain procedures for the removal of
directors by its stockholders. At any meeting of stockholders, duly called and
at which a quorum is present, the stockholders may, by the affirmative vote of
the holders of a majority of the votes entitled to be cast thereon, remove any
director or directors from office and may elect a successor or successors to
fill any resulting vacancies for the unexpired terms of removed directors.
Upon the written request of the holders of shares entitled to not less
than ten percent (10%) of all the votes entitled to be cast at such meeting, the
Secretary of the Corporation shall promptly call a special meeting of
stockholders for the purpose of voting upon the question of removal of any
director. Whenever ten or more stockholders of record who have been such for at
least six months preceding the date of application, and who hold in the
aggregate either shares having a net asset value of at least $25,000 or at least
one percent
18
<PAGE>
(1%) of the total outstanding shares, whichever is less, shall apply to the
Corporation's Secretary in writing, stating that they wish to communicate with
other stockholders with a view to obtaining signatures to a request for a
meeting as described above and accompanied by a form of communication and
request which they wish to transmit, the Secretary shall within five business
days after such application either: (1) afford to such applicants access to a
list of the names and addresses of all stockholders as recorded on the books of
the Corporation; or (2) inform such applicants as to the approximate number of
stockholders of record and the approximate cost of mailing to them the proposed
communication and form of request.
If the Secretary elects to follow the course specified in clause (2)
of the last sentence of the preceding paragraph, the Secretary, upon the written
request of such applicants, accompanied by a tender of the material to be mailed
and of the reasonable expenses of mailing, shall, with reasonable promptness,
mail such material to all stockholders of record at their addresses as recorded
on the books unless within five business days after such tender the Secretary
shall mail to such applicants and file with the Securities and Exchange
Commission, together with a copy of the material to be mailed, a written
statement signed by at least a majority of the Board of Directors to the effect
that in their opinion either such material contains untrue statements of fact or
omits to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the basis
of such opinion.
After opportunity for hearing upon the objections specified in the
written statement so filed, the Securities and Exchange Commission may, and if
demanded by the Board of Directors or by such applicants shall, enter an order
either sustaining one or more of such objections or refusing to sustain any of
them. If the Securities and Exchange Commission shall enter an order refusing to
sustain any of such objections, or if, after the entry of an order sustaining
one or more of such objections, the Securities and Exchange Commission shall
find, after notice and opportunity for hearing, that all objections so sustained
have been met, and shall enter an order so declaring, the Secretary shall mail
copies of such material to all stockholders with reasonable promptness after the
entry of such order and the renewal of such tender.
CAPITAL STRUCTURE
The Corporation's Articles of Incorporation permit the Directors to
issue 1,000,000,000 shares of common stock, with a $.0001 par value. The Board
of Directors has the power to designate one or more classes ("series") of shares
of common stock and to classify or reclassify any unissued shares with respect
to such series. Currently the Corporation is offering three series, the Leuthold
Core Investment Fund, the Leuthold Select Industries Fund and the Grizzly Short
Fund.
The shares of each Fund are fully paid and non-assessable; have no
preference as to conversion, exchange, dividends, retirement or other features;
and have no preemptive rights. Such shares have non-cumulative voting rights,
meaning that the holders of more than 50% of the shares voting for the election
of Directors can elect 100% of the Directors if they
19
<PAGE>
so choose. Generally shares are voted in the aggregate and not by each Fund,
except where class voting rights by Fund is required by Maryland law or the Act.
The shares of each Fund have the same preferences, limitations and
rights, except that all consideration received from the sale of shares of a
Fund, together with all income, earnings, profits and proceeds thereof, belong
to that Fund and are charged with the liabilities in respect of that Fund and of
that Fund's share of the general liabilities of the Corporation in the
proportion that the total net assets of the Fund bears to the total net assets
of all of the Funds. However the Board of Directors of the Corporation may, in
its discretion direct that any one or more general liabilities of the
Corporation be allocated among the Funds on a different basis. The net asset
value per share of each Fund is based on the assets belonging to that Fund less
the liabilities charged to that Fund, and dividends are paid on shares of each
Fund only out of lawfully available assets belonging to that Fund. In the event
of liquidation or dissolution of the Corporation, the shareholders of each Fund
will be entitled, out of the assets of the Corporation available for
distribution, to the assets belonging to such Fund.
PERFORMANCE INFORMATION
Each Fund may provide from time to time in advertisements, reports to
stockholders and other communications with stockholders its average annual
compounded rate of return as well as its total return and cumulative total
return. An average annual compounded rate of return refers to the rate of return
which, if applied to an initial investment at the beginning of a stated period
and compounded over the period, would result in the redeemable value of the
investment at the end of the stated period assuming reinvestment of all
dividends and distributions and reflecting the effect of all recurring fees.
Total return and cumulative total return similarly reflect net investment income
generated by, and the effect of any realized or unrealized appreciation or
depreciation of, the underlying investments of a Fund for a stated period,
assuming the reinvestment of all dividends and distributions and reflecting the
effect of all recurring fees. Total return figures are not annualized or
compounded and represent the aggregate percentage of dollar value change over
the period in question. Cumulative total return reflects a Fund's total return
since inception.
Each Fund's average annual compounded rate of return figures are
computed in accordance with the standardized method prescribed by the Securities
and Exchange Commission by determining the average annual compounded rates of
return over the periods indicated, that would equate the initial amount invested
to the ending redeemable value, according to the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
20
<PAGE>
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of
such period
This calculation (i) assumes all dividends and distributions are reinvested at
net asset value on the appropriate reinvestment dates as described in the
Prospectus, and (ii) deducts all recurring fees, such as advisory fees, charged
as expenses to all investor accounts.
Each Fund may compare its performance to other mutual funds with
similar investment objectives and to the industry as a whole, as represented by
Lipper Analytical Services, Inc., Morningstar, Inc., Money, Forbes, Business
Week and Barron's magazines and The Wall Street Journal. (Lipper Analytical
Services, Inc. and Morningstar, Inc. are independent fund ranking services that
rank mutual funds based upon total return performance.) Each Fund also may
compare its performance to the Standard & Poor's Composite Index of 500 Stocks,
the S&P 400 Midcap Index, the Russell 2000 Index, the Lehman Brothers
Government/Corporate Bond Index, U.S. Treasury Bills and to various combinations
thereof.
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP, 100 East Wisconsin Avenue, Milwaukee, Wisconsin
53202, serves as the independent accountants for the Funds.
21
<PAGE>
PART C
OTHER INFORMATION
Item 23 Exhibits
(a)(i) Registrant's Articles of Incorporation (1)
(a)(ii) Articles Supplementary
(a)(iii) Articles Supplementary
(b) Registrant's Bylaws (1)
(c) None
(d)(i) Investment Advisory Agreement (Leuthold Core Investment
Fund) (1)
(d)(ii) Investment Advisory Agreement (Leuthold Select Industries
Fund)
(d)(iii) Investment Advisory Agreement (Grizzly Short Fund)
(e) None
(f) None
(g)(i) Custodian Agreement with Firstar Trust Company (predecessor
to Firstar Bank, N.A.) (Leuthold Core Investment Fund) (1)
(g)(ii) Custodian Agreement with Firstar Bank, N.A. (Leuthold Select
Industries Fund)
(g)(iii) Custodian Agreement with Firstar Bank, N.A. (Grizzly Short
Fund)
(h)(i) Fund Administration Servicing Agreement with Firstar Trust
Company (predecessor to Firstar Mutual Fund Services, LLC)
(Leuthold Core Investment Fund) (1)
(h)(ii) Fund Administration Servicing Agreement with Firstar Mutual
Fund Services, LLC (Leuthold Select Industries Fund)
(h)(iii) Fund Administration Servicing Agreement with Firstar Mutual
Fund Services, LLC (Grizzly Short Fund)
(h)(iv) Transfer Agent Agreement with Firstar Trust Company
(predecessor to Firstar Mutual Fund Services, LLC) (Leuthold
Core Investment Fund) (1)
(h)(v) Transfer Agent Agreement with Firstar Mutual Fund Services,
LLC (Leuthold Select Industries Fund)
S-1
<PAGE>
(h)(vi) Transfer Agent Agreement with Firstar Mutual Fund Services,
LLC (Grizzly Short Fund)
(h)(vii) Fund Accounting Servicing Agreement with Firstar Trust
Company (predecessor to Firstar Mutual Fund Services, LLC)
(Leuthold Core Investment Fund) (1)
(h)(viii) Fund Accounting Servicing Agreement with Firstar Mutual Fund
Services, LLC (Leuthold Select Industries Fund)
(h)(ix) Fund Accounting Servicing Agreement with Firstar Mutual Fund
Services, LLC (Grizzly Short Fund)
(h)(x) Service Plan
(i) Opinion of Foley & Lardner, counsel for Registrant.
(j) Consent of Arthur Andersen LLP
(k) None
(l) Subscription Agreement (1)
(m) None
(n) None
(p) Code of Ethics of Leuthold Funds, Inc. and Leuthold &
Anderson, Inc. (2)
- ------------------
(1) Previously filed as an exhibit to Post-Effective Amendment No. 3 to the
Registration Statement and incorporated by reference thereto.
Post-Effective Amendment No. 3 was filed on January 23, 1998 and its
accession number is 0000897069-98-000011.
(2) Previously filed as an exhibit to Post-Effective Amendment No. 5 to the
Registration Statement and incorporated by reference thereto.
Post-Effective Amendment No. 5 was filed on January 31, 2000 and its
accession number is 0000897069-00-000023.
Item 24 Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
Registrant is not controlled by any person. Registrant neither
controls any person nor is under common control with any other person.
Item 25 Indemnification
---------------
Pursuant to the authority of the Maryland General Corporation Law,
particularly Section 2-418 thereof, Registrant's Board of Directors has adopted
the following bylaw which is in full force and effect and has not been modified
or cancelled:
S-2
<PAGE>
Article VII
GENERAL PROVISIONS
Section 7. Indemnification.
- --------- ---------------
A. The Corporation shall indemnify all of its corporate
representatives against expenses, including attorneys fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by them in
connection with the defense of any action, suit or proceeding, or threat or
claim of such action, suit or proceeding, whether civil, criminal,
administrative, or legislative, no matter by whom brought, or in any appeal in
which they or any of them are made parties or a party by reason of being or
having been a corporate representative, if the corporate representative acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the corporation and with respect to any criminal proceeding,
if he had no reasonable cause to believe his conduct was unlawful provided that
the corporation shall not indemnify corporate representatives in relation to
matters as to which any such corporate representative shall be adjudged in such
action, suit or proceeding to be liable for gross negligence, willful
misfeasance, bad faith, reckless disregard of the duties and obligations
involved in the conduct of his office, or when indemnification is otherwise not
permitted by the Maryland General Corporation Law.
B. In the absence of an adjudication which expressly absolves the
corporate representative, or in the event of a settlement, each corporate
representative shall be indemnified hereunder only if there has been a
reasonable determination based on a review of the facts that indemnification of
the corporate representative is proper because he has met the applicable
standard of conduct set forth in paragraph A. Such determination shall be made:
(i) by the board of directors, by a majority vote of a quorum which consists of
directors who were not parties to the action, suit or proceeding, or if such a
quorum cannot be obtained, then by a majority vote of a committee of the board
consisting solely of two or more directors, not, at the time, parties to the
action, suit or proceeding and who were duly designated to act in the matter by
the full board in which the designated directors who are parties to the action,
suit or proceeding may participate; or (ii) by special legal counsel selected by
the board of directors or a committee of the board by vote as set forth in (i)
of this paragraph, or, if the requisite quorum of the full board cannot be
obtained therefor and the committee cannot be established, by a majority vote of
the full board in which directors who are parties to the action, suit or
proceeding may participate.
C. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall create a rebuttable presumption that the person was guilty of
willful misfeasance, bad faith, gross negligence or reckless disregard to the
duties and obligations involved in the conduct of his or her office, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that his or her conduct was unlawful.
D. Expenses, including attorneys' fees, incurred in the
preparation of and/or presentation of the defense of a civil or criminal action,
suit or proceeding may be paid
S-3
<PAGE>
by the corporation in advance of the final disposition of such action, suit or
proceeding as authorized in the manner provided in Section 2-418(F) of the
Maryland General Corporation Law upon receipt of: (i) an undertaking by or on
behalf of the corporate representative to repay such amount unless it shall
ultimately be determined that he or she is entitled to be indemnified by the
corporation as authorized in this bylaw; and (ii) a written affirmation by the
corporate representative of the corporate representative's good faith belief
that the standard of conduct necessary for indemnification by the corporation
has been met.
E. The indemnification provided by this bylaw shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
these bylaws, any agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person subject
to the limitations imposed from time to time by the Investment Company Act of
1940, as amended.
F. This corporation shall have power to purchase and maintain
insurance on behalf of any corporate representative against any liability
asserted against him or her and incurred by him or her in such capacity or
arising out of his or her status as such, whether or not the corporation would
have the power to indemnify him or her against such liability under this bylaw
provided that no insurance may be purchased or maintained to protect any
corporate representative against liability for gross negligence, willful
misfeasance, bad faith or reckless disregard of the duties and obligations
involved in the conduct of his or her office.
G. "Corporate Representative" means an individual who is or was a
director, officer, agent or employee of the corporation or who serves or served
another corporation, partnership, joint venture, trust or other enterprise in
one of these capacities at the request of the corporation and who, by reason of
his or her position, is, was, or is threatened to be made, a party to a
proceeding described herein.
Insofar as indemnification for and with respect to liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers
and controlling persons of Registrant pursuant to the foregoing provisions or
otherwise, Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a director, officer or controlling person or
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
S-4
<PAGE>
Item 26 Business and Other Connections of Investment Adviser
----------------------------------------------------
Incorporated by reference to the Statement of Additional Information
pursuant to Rule 411 under the Securities Act of 1933.
Item 27 Principal Underwriters
----------------------
Not Applicable.
Item 28 Location of Accounts and Records
--------------------------------
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the physical possession of Registrant
and Registrant's Administrator as follows: the documents required to be
maintained by paragraphs (5), (6), (7), (10) and (11) of Rule 31a-1(b) will be
maintained by the Registrant at 100 North Sixth Street, Suite 700A, Minneapolis,
Minnesota; and all other records will be maintained by the Registrant's
Administrator, Firstar Mutual Fund Services, LLC, 615 East Michigan Street,
Milwaukee, Wisconsin.
Item 29 Management Services
-------------------
All management-related service contracts entered into by Registrant
are discussed in Parts A and B of this Registration Statement.
Item 30 Undertakings
------------
Registrant undertakes to furnish each person to whom a prospectus is
delivered a copy of Registrant's latest annual report to shareholders, upon
request and without charge.
S-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Fund has duly caused this Amended
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Minneapolis and State of Minnesota on the 27th
day of March, 2000.
LEUTHOLD FUNDS, INC.
(Registrant)
By: /s/ Steven C. Leuthold
----------------------------------
Steven C. Leuthold, President
Pursuant to the requirements of the Securities Act of 1933, this
Amended Registration Statement has been signed below by the following persons in
the capacities and on the date(s) indicated.
Name Title Date
---- ----- ----
/s/ Steven C. Leuthold President and Treasurer March 27, 2000
- --------------------------- (Principal Executive,
Steven C. Leuthold Financial and Accounting
Officer) and a Director
/s/ Charles D. Zender Director March 27, 2000
- ---------------------------
Charles D. Zender
/s/ John S. Chipman Director March 27, 2000
- ---------------------------
John S. Chipman
/s/ Lawrence L. Horsch Director March 27, 2000
- ---------------------------
Lawrence L. Horsch
/s/ Paul M. Kelnberger Director March 27, 2000
- ---------------------------
Paul M. Kelnberger
S-6
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Exhibit Page No.
---------- ------- -------
(a)(i) Registrant's Articles of Incorporation*
(a)(ii) Articles Supplementary
(a)(iii) Articles Supplementary
(b) Registrant's Bylaws*
(c) None
(d)(i) Investment Advisory Agreement (Leuthold Core
Investment Fund)
(d)(ii) Investment Advisory Agreement (Leuthold
Select Industries Fund)
(d)(iii) Investment Advisory Agreement (Grizzly Short
Fund)
(e) None
(f) None
(g)(i) Custodian Agreement with Firstar Trust
Company (predecessor to Firstar Bank, N.A.)
(Leuthold Core Investment Fund)*
(g)(ii) Custodian Agreement with Firstar Bank, N.A.
(Leuthold Select Industries Fund)
(g)(iii) Custodian Agreement with Firstar Bank, N.A.
(Grizzly Short Fund)
(h)(i) Fund Administration Servicing Agreement with
Firstar Trust Company (predecessor to Firstar
Mutual Fund Services, LLC) (Leuthold Core
Investment Fund)*
(h)(ii) Fund Administration Servicing Agreement with
Firstar Mutual Fund Services, LLC (Leuthold
Select Industries Fund)
<PAGE>
Exhibit No. Exhibit Page No.
---------- ------- -------
(h)(iii) Fund Administration Servicing Agreement with
Firstar Mutual Fund Services, LLC (Grizzly
Short Fund)
(h)(iv) Transfer Agent Agreement with Firstar Trust
Company (predecessor to Firstar Mutual Fund
Services, LLC) (Leuthold Core Investment
Fund)*
(h)(v) Transfer Agent Agreement with Firstar Mutual
Fund Services, LLC (Leuthold Select
Industries Fund)
(h)(vi) Transfer Agent Agreement with Firstar Mutual
Fund Services, LLC (Grizzly Short Fund)
(h)(vii) Fund Accounting Servicing Agreement with
Firstar Trust Company (predecessor to Firstar
Mutual Fund Services, LLC) (Leuthold Core
Investment Fund)*
(h)(viii) Fund Accounting Servicing Agreement with
Firstar Mutual Fund Services, LLC (Leuthold
Select Industries Fund)
(h)(ix) Fund Accounting Servicing Agreement with
Firstar Mutual Fund Services, LLC (Grizzly
Short Fund)
(h)(x) Service Plan
(i) Opinion of Foley & Lardner, counsel for
Registrant.
(j) Consent of Arthur Andersen LLP
(k) None
(l) Subscription Agreement (1)
(m) None
(n) None
(p) Code of Ethics of Leuthold Funds, Inc. and
Leuthold & Anderson, Inc.*
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
LEUTHOLD FUNDS, INC.
Pursuant to Section 2-208.1 of the Maryland General Corporation Law
(the "MGCL"), Leuthold Funds, Inc., having its registered office in Baltimore,
Maryland (the "Company"), does hereby certify to the State Department of
Assessments and Taxation of Maryland (the "Department") that:
FIRST: The Company is registered as an open-end investment company
under the Investment Company Act of 1940.
SECOND: Pursuant to Section 2-105(c) of the MGCL and Article IV of the
Company's Articles of Incorporation, the Board of Directors of the Company duly
adopted on March 27, 2000 resolutions: (a) increasing the total number of shares
of Common Stock, $0.0001 par value, that the Company has authority to issue
pursuant to Article IV of the Company's Articles of Incorporation from
500,000,000 shares to 1,000,000,000 shares; and (b) authorizing and directing
the filing of these Articles Supplementary for record with the Department.
THIRD: (a) The total number of shares of stock which the Company was
heretofore authorized to issue was 500,000,000 shares of Common Stock, $0.0001
par value, of which 250,000,000 shares were designated as follows:
Class Shares
----- ------
A 250,000,000
and 250,000,000 shares were undesignated.
(b) The total number of shares of stock which the Company shall be
authorized to issue upon the filing of these Articles Supplementary for record
with the Department is 1,000,000,000 shares of Common Stock, $0.0001 par value,
of which 250,000,000 shares shall be designated as follows:
Class Shares
----- ------
A 250,000,000
and 750,000,000 shares shall be undesignated.
FOURTH: These Articles Supplementary shall become effective as of the
time they are accepted by the Department for record.
<PAGE>
IN WITNESS WHEREOF, the Company has caused these Articles
Supplementary to be signed in its name and on its behalf by its President and
attested by its Secretary as of the 28th day of March, 2000.
LEUTHOLD FUNDS, INC.
By: /s/ Steven C. Leuthold
--------------------------------
Steven C. Leuthold, President
Attest: /s/ David R. Cragg
----------------------------
David R. Cragg, Secretary
2
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
LEUTHOLD FUNDS, INC.
Pursuant to Section 2-208 of the Maryland General Corporation Law (the
"MGCL"), Leuthold Funds, Inc., a Maryland corporation having its registered
office in Baltimore, Maryland (the "Company"), does hereby certify to the State
Department of Assessments and Taxation of Maryland (the "Department") that:
FIRST: The Company is registered as an open-end investment company
under the Investment Company Act of 1940.
SECOND: Pursuant to Section 2-105(a)(9) of the MGCL and Article IV of
the Company's Articles of Incorporation, the Board of Directors of the Company
duly adopted on March 27, 2000 resolutions: (a) designating 500,000,000 shares
of the Company's previously undesignated Common Stock, $.0001 par value, as
follows:
Class Shares
----- ------
B 250,000,000
C 250,000,000
and (b) authorizing and directing the filing of these Articles Supplementary for
record with the Department.
THIRD: The respective preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of each class of the Company's Common Stock, $.0001 par
value, are as set forth in Section B of Article IV of the Company's Articles of
Incorporation.
FOURTH: These Articles Supplementary shall become effective as of the
time they are accepted by the Department for record.
IN WITNESS WHEREOF, the Company has caused these Articles
Supplementary to be signed in its name and on its behalf by its President and
attested by its Secretary as of the 28th day of March, 2000.
LEUTHOLD FUNDS, INC.
By: /s/ Steven C. Leuthold
--------------------------------
Steven C. Leuthold, President
Attest: /s/ David R. Cragg
----------------------------
David R. Cragg, Secretary
INVESTMENT ADVISORY AGREEMENT
Agreement made this _____ day of _________, 2000 between Leuthold
Funds, Inc., a Maryland corporation (the "Company"), and Leuthold Weeden Capital
Management, LLC., a Delaware limited liability company (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Company is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940 (the "Act") as an open-end
management investment company consisting of three series, including the Leuthold
Select Industries Fund (the "Fund"); and
WHEREAS, the Company desires to retain the Adviser, which is an
investment adviser registered under the Investment Advisers Act of 1940, as the
investment adviser for the Fund.
NOW, THEREFORE, the Company and the Adviser do mutually promise and
agree as follows:
1. Employment. The Company hereby employs the Adviser to manage the
investment and reinvestment of the assets of the Fund for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
for the compensation herein provided and agrees during such period to render the
services and to assume the obligations herein set forth.
2. Authority of the Adviser. The Adviser shall supervise and manage
the investment portfolio of the Fund, and, subject to such policies as the board
of directors of the Company may determine, direct the purchase and sale of
investment securities in the day to day management of the Fund. The Adviser
shall for all purposes herein be deemed to be an
<PAGE>
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Company or the Fund in
any way or otherwise be deemed an agent of the Company or the Fund. However, one
or more members, officers or employees of the Adviser may serve as directors
and/or officers of the Company, but without compensation or reimbursement of
expenses for such services from the Company. Nothing herein contained shall be
deemed to require the Company to take any action contrary to its Articles of
Incorporation, as amended, restated or supplemented from time to time, or any
applicable statute or regulation, or to relieve or deprive the board of
directors of the Company of its responsibility for and control of the affairs of
the Fund.
3. Expenses. The Adviser, at its own expense and without reimbursement
from the Company or the Fund, shall furnish office space, and all necessary
office facilities, equipment and executive personnel for managing the
investments of the Fund. The Adviser shall not be required to pay any expenses
of the Fund except as provided herein if the total expenses borne by the Fund,
including the Adviser's fee and the fees paid to the Fund's Administrator but
excluding all federal, state and local taxes, interest, reimbursement payments
to securities lenders for dividend and interest payments on securities sold
short, brokerage commissions and extraordinary items ("excluded expenses"), in
any year exceed that percentage of the average net assets of the Fund for such
year, as determined by valuations made as of the close of each business day,
which is the most restrictive percentage provided by the state laws of the
various states in which the Fund's shares are qualified for sale or, if the
states in which the Fund's shares are qualified for sale impose no such
restrictions, 1.95%. The expenses of the Fund's operations borne by the Fund
include by way of illustration and not limitation, directors fees paid to those
directors who are not officers of the Company, the
-2-
<PAGE>
costs of preparing and printing registration statements required under the
Securities Act of 1933 and the Act (and amendments thereto), the expense of
registering its shares with the Securities and Exchange Commission and in the
various states, the printing and distribution cost of prospectuses mailed to
existing shareholders, the cost of stock certificates (if any), director and
officer liability insurance, reports to shareholders, reports to government
authorities and proxy statements, interest charges, reimbursement payments to
securities lenders for dividend and interest payments on securities sold short,
taxes, legal expenses, salaries of administrative and clerical personnel,
association membership dues, auditing and accounting services, insurance
premiums, brokerage and other expenses connected with the execution of portfolio
securities transactions, fees and expenses of the custodian of the Fund's
assets, expenses of calculating the net asset value and repurchasing and
redeeming shares, printing and mailing expenses, charges and expenses of
dividend disbursing agents, registrars and stock transfer agents and the cost of
keeping all necessary shareholder records and accounts.
The Company shall monitor the expense ratio of the Fund on a monthly
basis. If the accrued amount of the expenses of the Fund, less excluded
expenses, exceeds the expense limitation established herein, the Company shall
create an account receivable from the Adviser in the amount of such excess. In
such a situation the monthly payment of the Adviser's fee will be reduced by the
amount of such excess (and if the amount of such excess in any month is greater
than the monthly payment of the Adviser's fee, the Adviser will pay the Fund the
amount of such difference), subject to adjustment month by month during the
balance of the Company's fiscal year if accrued expenses, less excluded
expenses, thereafter fall below the expense limitation. If, in any of the three
fiscal years following any fiscal year
-3-
<PAGE>
in which the Adviser has reimbursed (either by fee reduction or payment) the
Fund for excess expenses, the Fund's expenses, less excluded expenses, as a
percentage of the Fund's average net assets, are less than the expense
limitation established herein, the Fund shall repay to the Adviser the amount
the Adviser reimbursed the Fund; provided, however, that the Fund's expenses,
less excluded expenses, as a percentage of the Fund's average net assets, shall
not exceed the limitation established herein.
4. Compensation of the Adviser. For the services to be rendered by the
Adviser hereunder, the Company, through and on behalf of the Fund, shall pay to
the Adviser an advisory fee, paid monthly, based on the average net assets of
the Fund, as determined by valuations made as of the close of each business day
of the month. The monthly advisory fee shall be 1/12 of 1.00% (1.00% per annum)
on the average daily net assets of the Fund. For any month in which this
Agreement is not in effect for the entire month, such fee shall be reduced
proportionately on the basis of the number of calendar days during which it is
in effect and the fee computed upon the average net asset value of the business
days during which it is so in effect.
5. Ownership of Shares of the Fund. The Adviser shall not take an
ownership position in the Fund, and shall not permit any of its members,
officers, or employees to take a long or short position in the shares of the
Fund, except for the purchase of shares of the Fund for investment purposes at
the same price as that available to the public at the time of purchase or in
connection with the initial capitalization of the Fund.
6. Exclusivity. The services of the Adviser to the Fund hereunder are
not to be deemed exclusive and the Adviser shall be free to furnish similar
services to others as long as the services hereunder are not impaired thereby.
Although the Adviser has agreed to
-4-
<PAGE>
permit the Fund and the Company to use the name "Leuthold", if they so desire,
it is understood and agreed that the Adviser reserves the right to use and to
permit other persons, firms or corporations, including investment companies, to
use such names, and that the Fund and the Company will not use such names if the
Adviser ceases to be the Fund's sole investment adviser. During the period that
this Agreement is in effect, the Adviser shall be the Fund's sole investment
adviser.
7. Liability. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Adviser, the Adviser shall not be subject to liability to the Fund or to
any shareholder of the Fund for any act or omission in the course of, or
connected with, rendering services hereunder, or for any losses that may be
sustained in the purchase, holding or sale of any security.
8. Brokerage Commissions. The Adviser, subject to the control and
direction of the Company's Board of Directors, shall have authority and
discretion to select brokers and dealers to execute portfolio transactions for
the Fund and for the selection of the markets on or in which the transactions
will be executed. The Adviser may cause the Fund to pay a broker-dealer which
provides brokerage and research services, as such services are defined in
Section 28(e) of the Securities Exchange Act of 1934 (the "Exchange Act"), to
the Adviser a commission for effecting a securities transaction in excess of the
amount another broker-dealer would have charged for effecting such transaction,
if the Adviser determines in good faith that such amount of commission is
reasonable in relation to the value of brokerage and research services provided
by the executing broker-dealer viewed in terms of either that particular
transaction or his overall responsibilities with respect to the accounts as to
which he exercises investment discretion (as defined in Section 3(a)(35) of the
Exchange Act). The
-5-
<PAGE>
Adviser shall provide such reports as the Company's Board of Directors may
reasonable request with respect to the Fund's total brokerage and the manner in
which that brokerage was allocated.
9. Code of Ethics. The Adviser has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the Act and has provided the
Company with a copy of the code of ethics and evidence of its adoption. Upon the
written request of the Company, the Adviser shall permit the Company to examine
any reports required to be made by the Adviser pursuant to Rule 17j-1(d) under
the Act.
10. Amendments. This Agreement may be amended by the mutual consent of
the parties; provided, however, that in no event may it be amended without the
approval of the board of directors of the Company in the manner required by the
Act, and, if required by the Act, by the vote of the majority of the outstanding
voting securities of the Fund, as defined in the Act.
11. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by the board of directors of the Company or by a
vote of the majority of the outstanding voting securities of the Fund, as
defined in the Act, upon giving sixty (60) days' written notice to the Adviser.
This Agreement may be terminated by the Adviser at any time upon the giving of
sixty (60) days' written notice to the Company. This Agreement shall terminate
automatically in the event of its assignment (as defined in Section 2(a)(4) of
the Act). Subject to prior termination as hereinbefore provided, this Agreement
shall continue in effect for an initial period beginning as of the date hereof
and ending ___________, 2002 and indefinitely thereafter, but only so long as
the continuance after such initial period is specifically approved annually by
(i) the board of directors of the
-6-
<PAGE>
Company or by the vote of the majority of the outstanding voting securities of
the Fund, as defined in the Act, and (ii) the board of directors of the Company
in the manner required by the Act, provided that any such approval may be made
effective not more than sixty (60) days thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the day first above written.
LEUTHOLD WEEDEN CAPITAL MANAGEMENT, LLC
(the "Adviser")
By:___________________________________
President
LEUTHOLD FUNDS, INC.
(the "Company")
By:___________________________________
President
-7-
INVESTMENT ADVISORY AGREEMENT
Agreement made this _____ day of ________, 2000 between Leuthold
Funds, Inc., a Maryland corporation (the "Company"), and Leuthold Weeden Capital
Management, LLC, Inc., a Delaware limited liability company (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Company is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940 (the "Act") as an open-end
management investment company consisting of three series, including the Grizzly
Short Fund (the "Fund"); and
WHEREAS, the Company desires to retain the Adviser, which is an
investment adviser registered under the Investment Advisers Act of 1940, as the
investment adviser for the Fund.
NOW, THEREFORE, the Company and the Adviser do mutually promise and
agree as follows:
1. Employment. The Company hereby employs the Adviser to manage the
investment and reinvestment of the assets of the Fund for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
for the compensation herein provided and agrees during such period to render the
services and to assume the obligations herein set forth.
2. Authority of the Adviser. The Adviser shall supervise and manage
the investment portfolio of the Fund, and, subject to such policies as the board
of directors of the Company may determine, direct the purchase and sale of
investment securities in the day to day management of the Fund. The Adviser
shall for all purposes herein be deemed to be an
<PAGE>
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Company or the Fund in
any way or otherwise be deemed an agent of the Company or the Fund. However, one
or more members, officers or employees of the Adviser may serve as directors
and/or officers of the Company, but without compensation or reimbursement of
expenses for such services from the Company. Nothing herein contained shall be
deemed to require the Company to take any action contrary to its Articles of
Incorporation, as amended, restated or supplemented from time to time, or any
applicable statute or regulation, or to relieve or deprive the board of
directors of the Company of its responsibility for and control of the affairs of
the Fund.
3. Expenses. The Adviser, at its own expense and without reimbursement
from the Company or the Fund, shall furnish office space, and all necessary
office facilities, equipment and executive personnel for managing the
investments of the Fund. The Adviser shall not be required to pay any expenses
of the Fund except as provided herein if the total expenses borne by the Fund,
including the Adviser's fee and the fees paid to the Fund's Administrator but
excluding all federal, state and local taxes, interest, reimbursement payments
to securities lenders for dividend and interest payments on securities sold
short, brokerage commissions and extraordinary items ("excluded expenses"), in
any year exceed that percentage of the average net assets of the Fund for such
year, as determined by valuations made as of the close of each business day,
which is the most restrictive percentage provided by the state laws of the
various states in which the Fund's shares are qualified for sale or, if the
states in which the Fund's shares are qualified for sale impose no such
restrictions, 2.50%. The expenses of the Fund's operations borne by the Fund
include by way of illustration and not limitation, directors fees paid to those
directors who are not officers of the Company, the
-2-
<PAGE>
costs of preparing and printing registration statements required under the
Securities Act of 1933 and the Act (and amendments thereto), the expense of
registering its shares with the Securities and Exchange Commission and in the
various states, the printing and distribution cost of prospectuses mailed to
existing shareholders, the cost of stock certificates (if any), director and
officer liability insurance, reports to shareholders, reports to government
authorities and proxy statements, interest charges, reimbursement payments to
securities lenders for dividend and interest payments on securities sold short,
taxes, legal expenses, salaries of administrative and clerical personnel,
association membership dues, auditing and accounting services, insurance
premiums, brokerage and other expenses connected with the execution of portfolio
securities transactions, fees and expenses of the custodian of the Fund's
assets, expenses of calculating the net asset value and repurchasing and
redeeming shares, printing and mailing expenses, charges and expenses of
dividend disbursing agents, registrars and stock transfer agents and the cost of
keeping all necessary shareholder records and accounts.
The Company shall monitor the expense ratio of the Fund on a monthly
basis. If the accrued amount of the expenses of the Fund, less excluded
expenses, exceeds the expense limitation established herein, the Company shall
create an account receivable from the Adviser in the amount of such excess. In
such a situation the monthly payment of the Adviser's fee will be reduced by the
amount of such excess (and if the amount of such excess in any month is greater
than the monthly payment of the Adviser's fee, the Adviser will pay the Fund the
amount of such difference), subject to adjustment month by month during the
balance of the Company's fiscal year if accrued expenses, less excluded
expenses, thereafter fall below the expense limitation. If, in any of the three
fiscal years following any fiscal year
-3-
<PAGE>
in which the Adviser has reimbursed (either by fee reduction or payment) the
Fund for excess expenses, the Fund's expenses, less excluded expenses, as a
percentage of the Fund's average net assets, are less than the expense
limitation established herein, the Fund shall repay the Adviser the amount the
Adviser reimbursed the Fund; provided, however, that the Fund's expenses, less
excluded expenses, as a percentage of the Fund's average net assets, shall not
exceed the limitation established herein.
4. Compensation of the Adviser. For the services to be rendered by the
Adviser hereunder, the Company, through and on behalf of the Fund, shall pay to
the Adviser an advisory fee, paid monthly, based on the average net assets of
the Fund, as determined by valuations made as of the close of each business day
of the month. The monthly advisory fee shall be 1/12 of 1.25% (1.25% per annum)
on the average daily net assets of the Fund. For any month in which this
Agreement is not in effect for the entire month, such fee shall be reduced
proportionately on the basis of the number of calendar days during which it is
in effect and the fee computed upon the average net asset value of the business
days during which it is so in effect.
5. Ownership of Shares of the Fund. The Adviser shall not take an
ownership position in the Fund, and shall not permit any of its members,
officers or employees to take a long or short position in the shares of the
Fund, except for the purchase of shares of the Fund for investment purposes at
the same price as that available to the public at the time of purchase or in
connection with the initial capitalization of the Fund.
6. Exclusivity. The services of the Adviser to the Fund hereunder are
not to be deemed exclusive and the Adviser shall be free to furnish similar
services to others as long as the services hereunder are not impaired thereby.
Although the Adviser has agreed to
-4-
<PAGE>
permit the Fund and the Company to use the name "Grizzly" or "Grizzly Short", if
they so desire, it is understood and agreed that the Adviser reserves the right
to use and to permit other persons, firms or corporations, including investment
companies, to use such names, and that the Fund and the Company will not use
such names if the Adviser ceases to be the Fund's sole investment adviser.
During the period that this Agreement is in effect, the Adviser shall be the
Fund's sole investment adviser.
7. Liability. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Adviser, the Adviser shall not be subject to liability to the Fund or to
any shareholder of the Fund for any act or omission in the course of, or
connected with, rendering services hereunder, or for any losses that may be
sustained in the purchase, holding or sale of any security.
8. Brokerage Commissions. The Adviser, subject to the control and
direction of the Company's Board of Directors, shall have authority and
discretion to select brokers and dealers to execute portfolio transactions for
the Fund and for the selection of the markets on or in which the transactions
will be executed. The Adviser may cause the Fund to pay a broker-dealer which
provides brokerage and research services, as such services are defined in
Section 28(e) of the Securities Exchange Act of 1934 (the "Exchange Act"), to
the Adviser a commission for effecting a securities transaction in excess of the
amount another broker-dealer would have charged for effecting such transaction,
if the Adviser determines in good faith that such amount of commission is
reasonable in relation to the value of brokerage and research services provided
by the executing broker-dealer viewed in terms of either that particular
transaction or his overall responsibilities with respect to the accounts as to
which he exercises investment discretion (as defined in Section 3(a)(35) of the
Exchange Act). The
-5-
<PAGE>
Adviser shall provide such reports as the Company's Board of Directors may
reasonable request with respect to the Fund's total brokerage and the manner in
which that brokerage was allocated.
9. Code of Ethics. The Adviser has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the Act and has provided the
Company with a copy of the code of ethics and evidence of its adoption. Upon the
written request of the Company, the Adviser shall permit the Company to examine
any reports required to be made by the Adviser pursuant to Rule 17j-1(d) under
the Act.
10. Amendments. This Agreement may be amended by the mutual consent of
the parties; provided, however, that in no event may it be amended without the
approval of the board of directors of the Company in the manner required by the
Act, and, if required by the Act, by the vote of the majority of the outstanding
voting securities of the Fund, as defined in the Act.
11. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by the board of directors of the Company or by a
vote of the majority of the outstanding voting securities of the Fund, as
defined in the Act, upon giving sixty (60) days' written notice to the Adviser.
This Agreement may be terminated by the Adviser at any time upon the giving of
sixty (60) days' written notice to the Company. This Agreement shall terminate
automatically in the event of its assignment (as defined in Section 2(a)(4) of
the Act). Subject to prior termination as hereinbefore provided, this Agreement
shall continue in effect for an initial period beginning as of the date hereof
and ending ___________, 2002 and indefinitely thereafter, but only so long as
the continuance after such initial period is specifically approved annually by
(i) the board of directors of the
-6-
<PAGE>
Company or by the vote of the majority of the outstanding voting securities of
the Fund, as defined in the Act, and (ii) the board of directors of the Company
in the manner required by the Act, provided that any such approval may be made
effective not more than sixty (60) days thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the day first above written.
LEUTHOLD WEEDEN CAPITAL MANAGEMENT, LLC
(the "Adviser")
By:____________________________________
President
LEUTHOLD FUNDS, INC.
(the "Company")
By:____________________________________
President
-7-
CUSTODIAN AGREEMENT
-------------------
THIS AGREEMENT made on ___________, 2000, between LEUTHOLD FUNDS,
INC., a Maryland Corporation, on behalf of Leuthold Select Industries Fund
(hereinafter called the ("Fund"), and FIRSTAR BANK, N.A., a national banking
association (hereinafter called "Custodian"),
W I T N E S S E T H
WHEREAS, the Fund desires that its securities and cash shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Fund and Custodian agree as follows:
1. Definitions
-----------
The word "securities" as used herein includes stocks, shares, bonds,
debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets.
The words "officers' certificate" shall mean a request or direction or
certification in writing signed in the name of the Fund by any two of the
President, a Vice President, the Secretary and the Treasurer of the Fund, or any
other persons duly authorized to sign by the Board of Directors.
The word "Board" shall mean Board of Directors of Leuthold Funds, Inc.
2. Names, Titles and Signatures of the Fund's Officers
---------------------------------------------------
An officer of the Fund will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board of
Directors, together with any changes which may occur from time to time.
3. Receipt and Disbursement of Money
---------------------------------
A. Custodian shall open and maintain a separate account or accounts in
the name of the Fund, subject only to draft or order by Custodian acting
pursuant to the terms of this Agreement. Custodian shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Fund. Custodian shall make payments of cash to, or for the
account of, the Fund from such cash only:
(a) for the purchase of securities for the portfolio of the Fund upon
the delivery of such securities to Custodian, registered in the name of the
Fund
<PAGE>
or of the nominee of Custodian referred to in Section 7 or in proper form
for transfer;
(b) for the purchase or redemption of shares of the common stock of
the Fund upon delivery thereof to Custodian, or upon proper instructions
from Leuthold Funds, Inc.;
(c) for the payment of interest, dividends, taxes, investment
adviser's fees or operating expenses (including, without limitation
thereto, fees for legal, accounting, auditing and custodian services and
expenses for printing and postage);
(d) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Fund held by or to be
delivered to Custodian; or
(e) for other proper corporate purposes certified by resolution of the
Board of Directors of the Fund.
Before making any such payment, Custodian shall receive (and may rely
upon) an officers' certificate requesting such payment and stating that it is
for a purpose permitted under the terms of items (a), (b), (c), or (d) of this
Subsection A, and also, in respect of item (e), upon receipt of an officers'
certificate specifying the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such payment is to
be made, provided, however, that an officers' certificate need not precede the
disbursement of cash for the purpose of purchasing a money market instrument, or
any other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the Fund issues appropriate oral or
facsimile instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received by Custodian for the
account of the Fund.
C. Custodian shall, upon receipt of proper instructions, make federal
funds available to the Fund as of specified times agreed upon from time to time
by the Fund and the custodian in the amount of checks received in payment for
shares of the Fund which are deposited into the Fund's account.
4. Segregated Accounts
-------------------
Upon receipt of proper instructions, the Custodian shall establish and
maintain a segregated account(s) for and on behalf of the portfolio, into which
account(s) may be transferred cash and/or securities.
2
<PAGE>
5. Transfer, Exchange, Redelivery, etc. of Securities
--------------------------------------------------
Custodian shall have sole power to release or deliver any securities
of the Fund held by it pursuant to this Agreement. Custodian agrees to transfer,
exchange or deliver securities held by it hereunder only:
(a) for sales of such securities for the account of the Fund upon
receipt by Custodian of payment therefore;
(b) when such securities are called, redeemed or retired or otherwise
become payable;
(c) for examination by any broker selling any such securities in
accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other securities alone
or other securities and cash whether pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment, or
otherwise;
(e) upon conversion of such securities pursuant to their terms into
other securities;
(f) upon exercise of subscription, purchase or other similar rights
represented by such securities;
(g) for the purpose of exchanging interim receipts or temporary
securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common stock of the
Fund upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a), (b),
(d), (e), (f), and (g), securities or cash receivable in exchange therefore
shall be deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian shall
receive (and may rely upon) an officers' certificate requesting such transfer,
exchange or delivery, and stating that it is for a purpose permitted under the
terms of items (a), (b), (c), (d), (e), (f), (g), or (h) of this Section 5 and
also, in respect of item (i), upon receipt of an officers' certificate
specifying the securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made, provided, however, that an officers' certificate need not precede
any such transfer, exchange or delivery of a money market instrument, or any
other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the Fund issues appropriate oral or
facsimile
3
<PAGE>
instructions to Custodian and an appropriate officers' certificate is received
by Custodian within two business days thereafter.
6. Custodian's Acts Without Instructions
-------------------------------------
Unless and until Custodian receives an officers' certificate to the
contrary, Custodian shall: (a) present for payment all coupons and other income
items held by it for the account of the Fund, which call for payment upon
presentation and hold the cash received by it upon such payment for the account
of the Fund; (b) collect interest and cash dividends received, with notice to
the Fund, for the account of the Fund; (c) hold for the account of the Fund
hereunder all stock dividends, rights and similar securities issued with respect
to any securities held by it hereunder; and (d) execute, as agent on behalf of
the Fund, all necessary ownership certificates required by the Internal Revenue
Code or the Income Tax Regulations of the United States Treasury Department or
under the laws of any state now or hereafter in effect, inserting the Fund's
name on such certificates as the owner of the securities covered thereby, to the
extent it may lawfully do so.
7. Registration of Securities
--------------------------
Except as otherwise directed by an officers' certificate, Custodian
shall register all securities, except such as are in bearer form, in the name of
a registered nominee of Custodian as defined in the Internal Revenue Code and
any Regulations of the Treasury Department issued hereunder or in any provision
of any subsequent federal tax law exempting such transaction from liability for
stock transfer taxes, and shall execute and deliver all such certificates in
connection therewith as may be required by such laws or regulations or under the
laws of any state. Custodian shall use its best efforts to the end that the
specific securities held by it hereunder shall be at all times identifiable in
its records.
The Fund shall from time to time furnish to Custodian appropriate
instruments to enable Custodian to hold or deliver in proper form for transfer,
or to register in the name of its registered nominee, any securities which it
may hold for the account of the Fund and which may from time to time be
registered in the name of the Fund.
8. Voting and Other Action
-----------------------
Neither Custodian nor any nominee of Custodian shall vote any of the
securities held hereunder by or for the account of the Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with relation to
such securities, such proxies to be executed by the registered holder of such
securities (if registered otherwise than in the name of the Fund), but without
indicating the manner in which such proxies are to be voted.
4
<PAGE>
9. Transfer Tax and Other Disbursements
------------------------------------
The Fund shall pay or reimburse Custodian from time to time for any
transfer taxes payable upon transfers of securities made hereunder, and for all
other necessary and proper disbursements and expenses made or incurred by
Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in connection
with securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any state, to exempt
from taxation any exemptible transfers and/or deliveries of any such securities.
10. Custodian
---------
Custodian shall be paid as compensation for its services pursuant to
this Agreement such compensation as may from time to time be agreed upon in
writing between the two parties. Until modified in writing, such compensation
shall be as set forth in Exhibit A attached hereto.
Custodian shall not be liable for any action taken in good faith upon
any certificate herein described or certified copy of any resolution of the
Board, and may rely on the genuineness of any such document which it may in good
faith believe to have been validly executed.
The Fund agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and liabilities
(including counsel fees) incurred or assessed against it or by its nominee in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct. Custodian is authorized to charge any account of the Fund for such
items. In the event of any advance of cash for any purpose made by Custodian
resulting from orders or instructions of the Fund, or in the event that
Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the performance
of this Agreement, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any property
at any time held for the account of the Fund shall be security therefore.
11. Subcustodians
-------------
Custodian is hereby authorized to engage another bank or trust company
as a Subcustodian for all or any part of the Fund's assets, so long as any such
bank or trust company is a bank or trust company organized under the laws of any
state of the United States, having an aggregate capital, surplus and undivided
profit, as shown by its last published report, of not less than Two Million
Dollars ($2,000,000) and provided further that, if the Custodian utilizes the
services of a Subcustodian, the Custodian shall remain fully liable and
5
<PAGE>
responsible for any losses caused to the Fund by the Subcustodian as fully as if
the Custodian was directly responsible for any such losses under the terms of
the Custodian Agreement.
Notwithstanding anything contained herein, if the Fund requires the
Custodian to engage specific Subcustodians for the safekeeping and/or clearing
of assets, the Fund agrees to indemnify and hold harmless Custodian from all
claims, expenses and liabilities incurred or assessed against it in connection
with the use of such Subcustodian in regard to the Fund's assets, except as may
arise from its own negligent action, negligent failure to act or willful
misconduct.
12. Reports by Custodian
--------------------
Custodian shall furnish the Fund periodically as agreed upon with a
statement summarizing all transactions and entries for the account of Fund.
Custodian shall furnish to the Fund, at the end of every month, a list of the
portfolio securities showing the aggregate cost of each issue. The books and
records of Custodian pertaining to its actions under this Agreement shall be
open to inspection and audit at reasonable times by officers of, and of auditors
employed by, the Fund.
13. Termination or Assignment
-------------------------
This Agreement may be terminated by the Fund, or by Custodian, on
ninety (90) days notice, given in writing and sent by registered mail to
Custodian at P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the Fund at 100
North Sixth Street, Suite 700A, Minneapolis, Minnesota 55403, as the case may
be. Upon any termination of this Agreement, pending appointment of a successor
to Custodian or a vote of the shareholders of the Fund to dissolve or to
function without a custodian of its cash, securities and other property,
Custodian shall not deliver cash, securities or other property of the Fund to
the Fund, but may deliver them to a bank or trust company of its own selection,
having an aggregate capital, surplus and undivided profits, as shown by its last
published report of not less than Two Million Dollars ($2,000,000) as a
Custodian for the Fund to be held under terms similar to those of this
Agreement, provided, however, that Custodian shall not be required to make any
such delivery or payment until full payment shall have been made by the Fund of
all liabilities constituting a charge on or against the properties then held by
Custodian or on or against Custodian, and until full payment shall have been
made to Custodian of all its fees, compensation, costs and expenses, subject to
the provisions of Section 10 of this Agreement.
This Agreement may not be assigned by Custodian without the consent of
the Fund, authorized or approved by a resolution of its Board of Directors.
14. Deposits of Securities in Securities Depositories
-------------------------------------------------
No provision of this Agreement shall be deemed to prevent the use by
Custodian of a central securities clearing agency or securities depository,
provided, however, that Custodian and the central securities clearing agency or
securities depository meet all applicable
6
<PAGE>
federal and state laws and regulations, and the Board of Directors of the Fund
approves by resolution the use of such central securities clearing agency or
securities depository.
15. Records
-------
To the extent that Custodian in any capacity prepares or maintains any
records required to be maintained and preserved by the Fund pursuant to the
provisions of the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder, Custodian agrees to make any such records
available to the Fund upon request and to preserve such records for the periods
prescribed in Rule 31a-2 under the Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and their respective corporate seals to be affixed hereto as of the
date first above-written by their respective officers thereunto duly authorized.
Executed in several counterparts, each of which is an original.
FIRSTAR BANK, N.A.
By _________________________________
Vice President
LEUTHOLD FUNDS, INC.
By _________________________________
7
CUSTODIAN AGREEMENT
-------------------
THIS AGREEMENT made on __________, 2000, between LEUTHOLD FUNDS, INC.,
a Maryland Corporation, on behalf of Grizzly Short Fund (hereinafter called the
("Fund"), and FIRSTAR BANK, N.A., a national banking association (hereinafter
called "Custodian"),
W I T N E S S E T H
WHEREAS, the Fund desires that its securities and cash shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Fund and Custodian agree as follows:
1. Definitions
-----------
The word "securities" as used herein includes stocks, shares, bonds,
debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets.
The words "officers' certificate" shall mean a request or direction or
certification in writing signed in the name of the Fund by any two of the
President, a Vice President, the Secretary and the Treasurer of the Fund, or any
other persons duly authorized to sign by the Board of Directors.
The word "Board" shall mean Board of Directors of Leuthold Funds, Inc.
2. Names, Titles and Signatures of the Fund's Officers
---------------------------------------------------
An officer of the Fund will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board of
Directors, together with any changes which may occur from time to time.
3. Receipt and Disbursement of Money
---------------------------------
A. Custodian shall open and maintain a separate account or accounts in
the name of the Fund, subject only to draft or order by Custodian acting
pursuant to the terms of this Agreement. Custodian shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Fund. Custodian shall make payments of cash to, or for the
account of, the Fund from such cash only:
(a) for the purchase of securities for the portfolio of the Fund upon
the delivery of such securities to Custodian, registered in the name of the
Fund
<PAGE>
or of the nominee of Custodian referred to in Section 7 or in proper form
for transfer;
(b) for the purchase or redemption of shares of the common stock of
the Fund upon delivery thereof to Custodian, or upon proper instructions
from Leuthold Funds, Inc.;
(c) for the payment of interest, dividends, taxes, investment
adviser's fees or operating expenses (including, without limitation
thereto, fees for legal, accounting, auditing and custodian services and
expenses for printing and postage);
(d) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Fund held by or to be
delivered to Custodian; or
(e) for other proper corporate purposes certified by resolution of the
Board of Directors of the Fund.
Before making any such payment, Custodian shall receive (and may rely
upon) an officers' certificate requesting such payment and stating that it is
for a purpose permitted under the terms of items (a), (b), (c), or (d) of this
Subsection A, and also, in respect of item (e), upon receipt of an officers'
certificate specifying the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such payment is to
be made, provided, however, that an officers' certificate need not precede the
disbursement of cash for the purpose of purchasing a money market instrument, or
any other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the Fund issues appropriate oral or
facsimile instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received by Custodian for the
account of the Fund.
C. Custodian shall, upon receipt of proper instructions, make federal
funds available to the Fund as of specified times agreed upon from time to time
by the Fund and the custodian in the amount of checks received in payment for
shares of the Fund which are deposited into the Fund's account.
4. Segregated Accounts
-------------------
Upon receipt of proper instructions, the Custodian shall establish and
maintain a segregated account(s) for and on behalf of the portfolio, into which
account(s) may be transferred cash and/or securities.
2
<PAGE>
5. Transfer, Exchange, Redelivery, etc. of Securities
--------------------------------------------------
Custodian shall have sole power to release or deliver any securities
of the Fund held by it pursuant to this Agreement. Custodian agrees to transfer,
exchange or deliver securities held by it hereunder only:
(a) for sales of such securities for the account of the Fund upon
receipt by Custodian of payment therefore;
(b) when such securities are called, redeemed or retired or otherwise
become payable;
(c) for examination by any broker selling any such securities in
accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other securities alone
or other securities and cash whether pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment, or
otherwise;
(e) upon conversion of such securities pursuant to their terms into
other securities;
(f) upon exercise of subscription, purchase or other similar rights
represented by such securities;
(g) for the purpose of exchanging interim receipts or temporary
securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common stock of the
Fund upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a), (b),
(d), (e), (f), and (g), securities or cash receivable in exchange therefore
shall be deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian shall
receive (and may rely upon) an officers' certificate requesting such transfer,
exchange or delivery, and stating that it is for a purpose permitted under the
terms of items (a), (b), (c), (d), (e), (f), (g), or (h) of this Section 5 and
also, in respect of item (i), upon receipt of an officers' certificate
specifying the securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made, provided, however, that an officers' certificate need not precede
any such transfer, exchange or delivery of a money market instrument, or any
other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the Fund issues appropriate oral or
facsimile
3
<PAGE>
instructions to Custodian and an appropriate officers' certificate is received
by Custodian within two business days thereafter.
6. Custodian's Acts Without Instructions
-------------------------------------
Unless and until Custodian receives an officers' certificate to the
contrary, Custodian shall: (a) present for payment all coupons and other income
items held by it for the account of the Fund, which call for payment upon
presentation and hold the cash received by it upon such payment for the account
of the Fund; (b) collect interest and cash dividends received, with notice to
the Fund, for the account of the Fund; (c) hold for the account of the Fund
hereunder all stock dividends, rights and similar securities issued with respect
to any securities held by it hereunder; and (d) execute, as agent on behalf of
the Fund, all necessary ownership certificates required by the Internal Revenue
Code or the Income Tax Regulations of the United States Treasury Department or
under the laws of any state now or hereafter in effect, inserting the Fund's
name on such certificates as the owner of the securities covered thereby, to the
extent it may lawfully do so.
7. Registration of Securities
--------------------------
Except as otherwise directed by an officers' certificate, Custodian
shall register all securities, except such as are in bearer form, in the name of
a registered nominee of Custodian as defined in the Internal Revenue Code and
any Regulations of the Treasury Department issued hereunder or in any provision
of any subsequent federal tax law exempting such transaction from liability for
stock transfer taxes, and shall execute and deliver all such certificates in
connection therewith as may be required by such laws or regulations or under the
laws of any state. Custodian shall use its best efforts to the end that the
specific securities held by it hereunder shall be at all times identifiable in
its records.
The Fund shall from time to time furnish to Custodian appropriate
instruments to enable Custodian to hold or deliver in proper form for transfer,
or to register in the name of its registered nominee, any securities which it
may hold for the account of the Fund and which may from time to time be
registered in the name of the Fund.
8. Voting and Other Action
-----------------------
Neither Custodian nor any nominee of Custodian shall vote any of the
securities held hereunder by or for the account of the Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with relation to
such securities, such proxies to be executed by the registered holder of such
securities (if registered otherwise than in the name of the Fund), but without
indicating the manner in which such proxies are to be voted.
4
<PAGE>
9. Transfer Tax and Other Disbursements
------------------------------------
The Fund shall pay or reimburse Custodian from time to time for any
transfer taxes payable upon transfers of securities made hereunder, and for all
other necessary and proper disbursements and expenses made or incurred by
Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in connection
with securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any state, to exempt
from taxation any exemptible transfers and/or deliveries of any such securities.
10. Custodian
---------
Custodian shall be paid as compensation for its services pursuant to
this Agreement such compensation as may from time to time be agreed upon in
writing between the two parties. Until modified in writing, such compensation
shall be as set forth in Exhibit A attached hereto.
Custodian shall not be liable for any action taken in good faith upon
any certificate herein described or certified copy of any resolution of the
Board, and may rely on the genuineness of any such document which it may in good
faith believe to have been validly executed.
The Fund agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and liabilities
(including counsel fees) incurred or assessed against it or by its nominee in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct. Custodian is authorized to charge any account of the Fund for such
items. In the event of any advance of cash for any purpose made by Custodian
resulting from orders or instructions of the Fund, or in the event that
Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the performance
of this Agreement, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any property
at any time held for the account of the Fund shall be security therefore.
11. Subcustodians
-------------
Custodian is hereby authorized to engage another bank or trust company
as a Subcustodian for all or any part of the Fund's assets, so long as any such
bank or trust company is a bank or trust company organized under the laws of any
state of the United States, having an aggregate capital, surplus and undivided
profit, as shown by its last published report, of not less than Two Million
Dollars ($2,000,000) and provided further that, if the Custodian utilizes the
services of a Subcustodian, the Custodian shall remain fully liable and
5
<PAGE>
responsible for any losses caused to the Fund by the Subcustodian as fully as if
the Custodian was directly responsible for any such losses under the terms of
the Custodian Agreement.
Notwithstanding anything contained herein, if the Fund requires the
Custodian to engage specific Subcustodians for the safekeeping and/or clearing
of assets, the Fund agrees to indemnify and hold harmless Custodian from all
claims, expenses and liabilities incurred or assessed against it in connection
with the use of such Subcustodian in regard to the Fund's assets, except as may
arise from its own negligent action, negligent failure to act or willful
misconduct.
12. Reports by Custodian
--------------------
Custodian shall furnish the Fund periodically as agreed upon with a
statement summarizing all transactions and entries for the account of Fund.
Custodian shall furnish to the Fund, at the end of every month, a list of the
portfolio securities showing the aggregate cost of each issue. The books and
records of Custodian pertaining to its actions under this Agreement shall be
open to inspection and audit at reasonable times by officers of, and of auditors
employed by, the Fund.
13. Termination or Assignment
-------------------------
This Agreement may be terminated by the Fund, or by Custodian, on
ninety (90) days notice, given in writing and sent by registered mail to
Custodian at P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the Fund at 100
North Sixth Street, Suite 700A, Minneapolis, Minnesota 55403, as the case may
be. Upon any termination of this Agreement, pending appointment of a successor
to Custodian or a vote of the shareholders of the Fund to dissolve or to
function without a custodian of its cash, securities and other property,
Custodian shall not deliver cash, securities or other property of the Fund to
the Fund, but may deliver them to a bank or trust company of its own selection,
having an aggregate capital, surplus and undivided profits, as shown by its last
published report of not less than Two Million Dollars ($2,000,000) as a
Custodian for the Fund to be held under terms similar to those of this
Agreement, provided, however, that Custodian shall not be required to make any
such delivery or payment until full payment shall have been made by the Fund of
all liabilities constituting a charge on or against the properties then held by
Custodian or on or against Custodian, and until full payment shall have been
made to Custodian of all its fees, compensation, costs and expenses, subject to
the provisions of Section 10 of this Agreement.
This Agreement may not be assigned by Custodian without the consent of
the Fund, authorized or approved by a resolution of its Board of Directors.
14. Deposits of Securities in Securities Depositories
-------------------------------------------------
No provision of this Agreement shall be deemed to prevent the use by
Custodian of a central securities clearing agency or securities depository,
provided, however, that Custodian and the central securities clearing agency or
securities depository meet all applicable
6
<PAGE>
federal and state laws and regulations, and the Board of Directors of the Fund
approves by resolution the use of such central securities clearing agency or
securities depository.
15. Records
-------
To the extent that Custodian in any capacity prepares or maintains any
records required to be maintained and preserved by the Fund pursuant to the
provisions of the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder, Custodian agrees to make any such records
available to the Fund upon request and to preserve such records for the periods
prescribed in Rule 31a-2 under the Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and their respective corporate seals to be affixed hereto as of the
date first above-written by their respective officers thereunto duly authorized.
Executed in several counterparts, each of which is an original.
FIRSTAR BANK, N.A.
By _______________________________
Vice President
LEUTHOLD FUNDS, INC.
By _______________________________
7
FUND ADMINISTRATION SERVICING AGREEMENT
---------------------------------------
THIS AGREEMENT is made and entered into on this ____ day of January,
2000, by and between LEUTHOLD FUNDS, INC., on behalf of Leuthold Select
Industries Fund (hereinafter referred to as the "Fund") and FIRSTAR MUTUAL FUND
SERVICES, LLC, a limited liability company organized under the laws of the State
of Wisconsin (hereinafter referred to as "Firstar").
WHEREAS, the Fund is an open-end management investment company which
is registered under the Investment Company Act of 1940;
WHEREAS, Firstar is in the business of providing fund administration
services for the benefit of its customers;
NOW, THEREFORE, the Fund and Firstar do mutually promise and agree as
follows:
I. Duties and Responsibilities of Firstar
--------------------------------------
A. General Fund Management
1. Act as liaison among all fund service providers
2. Coordinate board communication by:
a. Assisting fund counsel in establishing meeting agendas
b. Preparing board reports based on financial and
administrative data
c. Evaluating independent auditor
d. Securing and monitoring fidelity bond and director and
officers liability coverage, if requested
3. Audits
a. Prepare appropriate schedules and assist independent
auditors
b. Provide information to SEC and facilitate audit process
c. Provide office facilities
4. Assist in overall operations of the Fund
B. Compliance
1. Regulatory Compliance
<PAGE>
a. Periodically monitor compliance with Investment Company Act
of 1940 requirements
1) Asset diversification tests
2) Total return and SEC yield calculations
3) Maintenance of books and records under Rule 31a-3
4) Code of ethics
b. Periodically monitor prospectus investment limitations
2. Blue Sky Compliance
a. File initial state application and all subsequent reports
b. Monitor status in each state
3. SEC Registration and Reporting
a. Assisting Fund's counsel in updating prospectus, statement
of additional information, proxy statements, and Rule 24f-2
notice
b. Annual and semiannual reports
4. IRS Compliance
a. Periodically monitor Fund's status as a regulated investment
company under Subchapter M through review of the following:
1) Asset diversification requirements
2) Qualifying income requirements
3) Distribution requirements
b. Calculate required distributions (including excise tax
distributions)
C. Financial Reporting
1. Provide financial data required by fund prospectus and statement
of additional information
2. Prepare financial reports for shareholders, the board, the SEC,
and independent auditors
2
<PAGE>
3. Monitor expense accruals and payments
D. Tax Reporting
1. Prepare appropriate federal and state tax returns including forms
1120/8610 with any necessary schedules
2. Prepare state income breakdowns where relevant
3. File 1099 Miscellaneous for payments to directors and other
service providers
4. Monitor wash losses
5. Calculate eligible dividend income for corporate shareholders
II. Compensation
------------
The Fund agrees to pay Firstar for performance of the duties listed in
this Agreement and the fees and out-of-pocket expenses as set forth in the
attached Schedule A.
These fees may be changed from time to time, subject to mutual written
Agreement between the Fund and Firstar.
The Fund agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
III. Performance of Service; Limitation of Liability
-----------------------------------------------
Firstar shall exercise reasonable care in the performance of its
duties under the Agreement. The Fund agrees to reimburse and make Firstar whole
for any loss or damages (including reasonable fees and expenses of legal
counsel) arising out of or in connection with its actions under this Agreement
so long as Firstar acts in good faith and is not negligent or guilty of any
willful misconduct.
Firstar shall not be liable or responsible for delays or errors
occurring by reason of circumstances beyond its control, including acts of civil
or military authority, natural or state emergencies, fire, mechanical breakdown,
flood or catastrophe, act of God, insurrection, war, riots, or failure of
transportation, communication, or power supply.
In the event of a mechanical breakdown beyond its control, Firstar
shall take all reasonable steps to minimize service interruptions for any period
that such interruption continues beyond Firstar's control. Firstar will make
every reasonable effort to restore any lost or damaged data and correct any
errors resulting from such a breakdown at the expense of Firstar. Firstar agrees
that it shall, at all times, have reasonable contingency plans with appropriate
parties, making reasonable provisions for emergency use of electrical data
processing equipment to the extent appropriate equipment is available.
Representatives of the
3
<PAGE>
Fund shall be entitled to inspect Firstar's premises and operating capabilities
at any time during regular business hours of Firstar, upon reasonable notice to
Firstar.
This indemnification includes any act, omission to act, or delay by
Firstar in reliance upon, or in accordance with, any written or oral instruction
it receives from any duly authorized officer of the Fund.
Regardless of the above, Firstar reserves the right to reprocess and
correct administrative errors at its own expense.
IV. Confidentiality
---------------
Firstar shall handle, in confidence, all information relating to the
Fund's business which is received by Firstar during the course of rendering any
service hereunder.
V. Data Necessary to Perform Service
---------------------------------
The Fund or its agent, which may be Firstar, shall furnish to Firstar
the data necessary to perform the services described herein at times and in such
form as mutually agreed upon.
VI. Terms of Agreement
------------------
This Agreement shall become effective as of the date hereof.
Thereafter, if not terminated, this Agreement shall continue automatically in
effect for successive annual periods unless otherwise terminated by either party
upon giving ninety (90) days prior written notice to the other party or such
shorter period as is mutually agreed upon by the parties.
VII. Duties in the Event of Termination
-----------------------------------
In the event that, in connection with termination, a successor to any
of Firstar's duties or responsibilities hereunder is designated by the Fund by
written notice to Firstar, Firstar will promptly, upon such termination and at
the expense of the Fund, transfer to such successor all relevant books, records,
correspondence, and other data established or maintained by Firstar under this
Agreement in a form reasonably acceptable to the Fund (if such form differs from
the form in which Firstar has maintained, the Fund shall pay any expenses
associated with transferring the data to such form), and will cooperate in the
transfer of such duties and responsibilities, including provision for assistance
from Firstar's personnel in the establishment of books, records, and other data
by such successor.
4
<PAGE>
VII. Choice of Law
-------------
This Agreement shall be construed in accordance with the laws of the
State of Wisconsin.
LEUTHOLD FUNDS, INC FIRSTAR MUTUAL FUND SERVICES, LLC
By:__________________________________ By: _____________________________
5
FUND ADMINISTRATION SERVICING AGREEMENT
---------------------------------------
THIS AGREEMENT is made and entered into on this ______day of January,
2000, by and between LEUTHOLD FUNDS, INC., on behalf of Grizzly Short Fund
(hereinafter referred to as the "Fund") and FIRSTAR MUTUAL FUND SERVICES, LLC, a
limited liability company organized under the laws of the State of Wisconsin
(hereinafter referred to as "Firstar").
WHEREAS, the Fund is an open-end management investment company which
is registered under the Investment Company Act of 1940;
WHEREAS, Firstar is in the business of providing fund administration
services for the benefit of its customers;
NOW, THEREFORE, the Fund and Firstar do mutually promise and agree as
follows:
I. Duties and Responsibilities of Firstar
--------------------------------------
A. General Fund Management
1. Act as liaison among all fund service providers
2. Coordinate board communication by:
a. Assisting fund counsel in establishing meeting agendas
b. Preparing board reports based on financial and
administrative data
c. Evaluating independent auditor
d. Securing and monitoring fidelity bond and director and
officers liability coverage, if requested
3. Audits
a. Prepare appropriate schedules and assist independent
auditors
b. Provide information to SEC and facilitate audit process
c. Provide office facilities
4. Assist in overall operations of the Fund
B. Compliance
1. Regulatory Compliance
<PAGE>
a. Periodically monitor compliance with Investment Company Act
of 1940 requirements
1) Asset diversification tests
2) Total return and SEC yield calculations
3) Maintenance of books and records under Rule 31a-3
4) Code of ethics
b. Periodically monitor prospectus investment limitations
2. Blue Sky Compliance
a. File initial state application and all subsequent reports
b. Monitor status in each state
3. SEC Registration and Reporting
a. Assisting Fund's counsel in updating prospectus, statement
of additional information, proxy statements, and Rule 24f-2
notice
b. Annual and semiannual reports
4. IRS Compliance
a. Periodically monitor Fund's status as a regulated investment
company under Subchapter M through review of the following:
1) Asset diversification requirements
2) Qualifying income requirements
3) Distribution requirements
b. Calculate required distributions (including excise tax
distributions)
C. Financial Reporting
1. Provide financial data required by fund prospectus and statement
of additional information
2. Prepare financial reports for shareholders, the board, the SEC,
and independent auditors
2
<PAGE>
3. Monitor expense accruals and payments
D. Tax Reporting
1. Prepare appropriate federal and state tax returns including forms
1120/8610 with any necessary schedules
2. Prepare state income breakdowns where relevant
3. File 1099 Miscellaneous for payments to directors and other
service providers
4. Monitor wash losses
5. Calculate eligible dividend income for corporate shareholders
II. Compensation
------------
The Fund agrees to pay Firstar for performance of the duties listed in
this Agreement and the fees and out-of-pocket expenses as set forth in the
attached Schedule A.
These fees may be changed from time to time, subject to mutual written
Agreement between the Fund and Firstar.
The Fund agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
III. Performance of Service; Limitation of Liability
-----------------------------------------------
Firstar shall exercise reasonable care in the performance of its
duties under the Agreement. The Fund agrees to reimburse and make Firstar whole
for any loss or damages (including reasonable fees and expenses of legal
counsel) arising out of or in connection with its actions under this Agreement
so long as Firstar acts in good faith and is not negligent or guilty of any
willful misconduct.
Firstar shall not be liable or responsible for delays or errors
occurring by reason of circumstances beyond its control, including acts of civil
or military authority, natural or state emergencies, fire, mechanical breakdown,
flood or catastrophe, act of God, insurrection, war, riots, or failure of
transportation, communication, or power supply.
In the event of a mechanical breakdown beyond its control, Firstar
shall take all reasonable steps to minimize service interruptions for any period
that such interruption continues beyond Firstar's control. Firstar will make
every reasonable effort to restore any lost or damaged data and correct any
errors resulting from such a breakdown at the expense of Firstar. Firstar agrees
that it shall, at all times, have reasonable contingency plans with appropriate
parties, making reasonable provisions for emergency use of electrical data
processing equipment to the extent appropriate equipment is available.
Representatives of the
3
<PAGE>
Fund shall be entitled to inspect Firstar's premises and operating capabilities
at any time during regular business hours of Firstar, upon reasonable notice to
Firstar.
This indemnification includes any act, omission to act, or
delay by Firstar in reliance upon, or in accordance with, any written or oral
instruction it receives from any duly authorized officer of the Fund.
Regardless of the above, Firstar reserves the right to reprocess and
correct administrative errors at its own expense.
IV. Confidentiality
---------------
Firstar shall handle, in confidence, all information relating to the
Fund's business which is received by Firstar during the course of rendering any
service hereunder.
V. Data Necessary to Perform Service
---------------------------------
The Fund or its agent, which may be Firstar, shall furnish to Firstar
the data necessary to perform the services described herein at times and in such
form as mutually agreed upon.
VI. Terms of Agreement
------------------
This Agreement shall become effective as of the date hereof.
Thereafter, if not terminated, this Agreement shall continue automatically in
effect for successive annual periods unless otherwise terminated by either party
upon giving ninety (90) days prior written notice to the other party or such
shorter period as is mutually agreed upon by the parties.
VII. Duties in the Event of Termination
----------------------------------
In the event that, in connection with termination, a successor to any
of Firstar's duties or responsibilities hereunder is designated by the Fund by
written notice to Firstar, Firstar will promptly, upon such termination and at
the expense of the Fund, transfer to such successor all relevant books, records,
correspondence, and other data established or maintained by Firstar under this
Agreement in a form reasonably acceptable to the Fund (if such form differs from
the form in which Firstar has maintained, the Fund shall pay any expenses
associated with transferring the data to such form), and will cooperate in the
transfer of such duties and responsibilities, including provision for assistance
from Firstar's personnel in the establishment of books, records, and other data
by such successor.
4
<PAGE>
VIII.Choice of Law
-------------
This Agreement shall be construed in accordance with the laws of the
State of Wisconsin.
LEUTHOLD FUNDS, INC FIRSTAR MUTUAL FUND SERVICES, LLC
By:______________________________ By: _______________________________-
5
TRANSFER AGENT AGREEMENT
------------------------
THIS AGREEMENT is made and entered into on this ____ day of ________,
2000, by and between LEUTHOLD FUNDS, INC., on behalf of Leuthold Select
Industries Fund (hereinafter referred to as the "Fund") and FIRSTAR MUTUAL FUND
SERVICES, LLC, a limited liability company organized under the laws of the State
of Wisconsin (hereinafter referred to as the "Agent").
W I T N E S S E T H :
WHEREAS, the Fund is an open-end management investment company which
is registered under the Investment Company Act of 1940; and
WHEREAS, the Agent is in the business of administering transfer and
dividend disbursing agent functions for the benefit of its customers;
NOW, THEREFORE, the Fund and the Agent do mutually promise and agree
as follows:
1. Terms of Appointment; Duties of the Agent
-----------------------------------------
Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints the Agent to act as transfer agent and dividend
disbursing agent.
The Agent shall perform all of the customary services of a transfer
agent and dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to:
A. Receive orders for the purchase of shares;
B. Process purchase orders and issue the appropriate number of
certificated or uncertificated shares with such uncertificated shares
being held in the appropriate shareholder account;
C. Process redemption requests received in good order;
D. Pay monies in accordance with the instructions of redeeming
shareholders;
E. Process transfers of shares in accordance with the shareowner's
instructions;
F. Process exchanges between funds within the same family of funds;
G. Issue and/or cancel certificates as instructed; replace lost, stolen
or destroyed certificates upon receipt of satisfactory indemnification
or surety bond;
<PAGE>
H. Prepare and transmit payments for dividends and distributions declared
by the Fund;
I. Make changes to shareholder records, including, but not limited to,
address changes in plans (i.e., systematic withdrawal, automatic
investment, dividend reinvestment, etc.);
J. Record the issuance of shares of the Fund and maintain, pursuant to
Section Rule 17Ad-10(e), a record of the total number of shares of the
Fund which are authorized, issued and outstanding;
K. Prepare shareholder meeting lists and, if applicable, mail, receive
and tabulate proxies;
L. Mail shareholder reports and prospectuses to current shareholders;
M. Prepare and file U.S. Treasury Department forms 1099 and other
appropriate information returns required with respect to dividends and
distributions for all shareholders;
N. Provide shareholder account information upon request and prepare and
mail confirmations and statements of account to shareholders for all
purchases, redemptions and other confirmable transactions as agreed
upon with the Fund; and
O. Provide a Blue Sky System which will enable the Fund to monitor the
total number of shares sold in each state. In addition, the Fund shall
identify to the Agent in writing those transactions and assets to be
treated as exempt from the Blue Sky reporting to the Fund for each
state. The responsibility of the Agent for the Fund's Blue Sky state
registration status is solely limited to the initial compliance by the
Fund and the reporting of such transactions to the Fund.
2. Compensation
------------
The Fund agrees to pay the Agent for performance of the duties
listed in this Agreement; the fees and out-of-pocket expenses include, but are
not limited to the following: printing, postage, forms, stationery, record
retention, mailing, insertion, programming, labels, shareholder lists and proxy
expenses.
These fees and reimbursable expenses may be changed from time to time
subject to mutual written agreement between the Fund and the Agent.
The Fund agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
2
<PAGE>
3. Representations of Agent
------------------------
The Agent represents and warrants to the Fund that:
A. It is a limited liability company duly organized, existing and in good
standing under the laws of Wisconsin;
B. It is duly qualified to carry on its business in the state of
Wisconsin;
C. It is empowered under applicable laws and by its organizational and
operational documents to enter into and perform this Agreement;
D. All requisite corporate proceedings have been taken to authorize it to
enter and perform this Agreement; and
E. It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement.
4. Representations of the Fund
---------------------------
The Fund represents and warrants to the Agent that:
A. The Fund is an open-end diversified investment company under the
Investment Company Act of 1940;
B. The Fund is a corporation or business organized, existing, and in good
standing under the laws of Maryland;
C. The Fund is empowered under applicable laws and by its Corporate
Charter and bylaws to enter into and perform this Agreement;
D. All necessary proceedings required by the Corporate Charter have been
taken to authorize it to enter into and perform this Agreement;
E. The Fund will comply with all applicable requirements of the
Securities and Exchange Acts of 1933 and 1934, as amended, the
Investment Company Act of 1940, as amended, and any laws, rules and
regulations of governmental authorities having jurisdiction; and
F. A registration statement under the Securities Act of 1933 is currently
effective and will remain effective, and appropriate state securities
law filings have been made and will continue to be made, with respect
to all shares of the Fund being offered for sale.
3
<PAGE>
5. Covenants of Fund and Agent
---------------------------
The Fund shall furnish the Agent a certified copy of the resolution of
the Board of Directors of the Fund authorizing the appointment of the Agent and
the execution of this Agreement. The Fund shall provide to the Agent a copy of
the Corporate Charter, bylaws of the Corporation, and all amendments.
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the rules thereunder, the Agent agrees that all such records prepared or
maintained by the Agent relating to the services to be performed by the Agent
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such section and rules and will be surrendered
to the Fund on and in accordance with its request.
6. Indemnification; Remedies Upon Breach
-------------------------------------
The Agent agrees to use reasonable care and act in good faith in
performing its duties hereunder.
Notwithstanding the foregoing, the Agent shall not be liable or
responsible for delays or errors occurring by reason of circumstances beyond its
control, including acts of civil or military authority, national or state
emergencies, fire, mechanical or equipment failure, flood or catastrophe, acts
of God, insurrection or war. In the event of a mechanical breakdown beyond its
control, the Agent shall take all reasonable steps to minimize service
interruptions for any period that such interruption continues beyond the Agent's
control. The Agent will make every reasonable effort to restore any lost or
damaged data, and the correcting of any errors resulting from such a breakdown
will be at the Agent's expense. The Agent agrees that it shall, at all times,
have reasonable contingency plans with appropriate parties, making reasonable
provision for emergency use of electrical data processing equipment to the
extent appropriate equipment is available. Representatives of Leuthold Funds,
Inc. shall be entitled to inspect the Agent's premises and operating
capabilities at any time during regular business hours of the Agent, upon
reasonable notice to the Agent.
The Fund will indemnify and hold the Agent harmless against any and
all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action or suit not
resulting from the Agent's bad faith or negligence, and arising out of or in
connection with the Agent's duties on behalf of the Fund hereunder.
Further, the Fund will indemnify and hold the Agent harmless against
any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from any claim, demand, action
or suit as a result of the negligence of the Fund or the principal underwriter
(unless contributed to by the Agent's own negligence or bad faith); or as a
result of the Agent acting upon telephone instructions relating to the exchange
or redemption of shares received by the Agent and reasonably believed by the
Agent to have
4
<PAGE>
originated from the record owner of the subject shares; or as a result of the
Agent acting upon any instructions executed or orally communicated by a duly
authorized officer or employee of the Fund, according to such lists of
authorized officers and employees furnished to the Agent and as amended from
time to time in writing by a resolution of the Board of Directors of the Fund;
or as a result of acting in reliance upon any genuine instrument or stock
certificate signed, countersigned or executed by any person or persons
authorized to sign, countersign or execute the same.
In order for this section to apply, it is understood that if in any
case the Fund may be asked to indemnify or hold harmless the Agent, the Fund
shall be advised of all pertinent facts concerning the situation in question,
and it is further understood that the Agent will use reasonable care to notify
the Fund promptly concerning any situation which presents or appears likely to
present a claim for indemnification against the Fund. The Fund shall have the
option to defend the Agent against any claim which may be the subject of this
indemnification and, in the event that the Fund so elects, the Agent will so
notify the Fund, and thereupon the Fund shall take over complete defense of the
claim and the Agent shall sustain no further legal or other expenses in such
situation for which the Agent shall seek indemnification under this section. The
Agent will in no case confess any claim or make any compromise in any case in
which the Fund will be asked to indemnify the Agent, except with the Fund's
prior written consent.
7. Confidentiality
---------------
The Agent agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Fund and its
shareholders and shall not be disclosed to any other party, except after prior
notification to and approval in writing by the Fund, which approval shall not be
unreasonably withheld and may not be withheld where the Agent may be exposed to
civil or criminal contempt proceedings for failure to comply after being
requested to divulge such information by duly constituted authorities.
8. Wisconsin Law to Apply
----------------------
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the state of Wisconsin.
9. Amendment, Assignment, Termination and Notice
---------------------------------------------
A. This Agreement may be amended by the mutual written consent of the
parties.
B. This Agreement may be terminated upon ninety (90) day's written notice
given by one party to the other.
C. This Agreement and any right or obligation hereunder may not be
assigned by either party without the signed, written consent of the
other party.
5
<PAGE>
D. Any notice required to be given by the parties to each other under the
terms of this Agreement shall be in writing, addressed and delivered,
or mailed to the principal place of business of the other party.
E. In the event that the Fund gives to the Agent its written intention to
terminate and appoint a successor transfer agent, the Agent agrees to
cooperate in the transfer of its duties and responsibilities to the
successor, including any and all relevant books, records and other
data established or maintained by the Agent under this Agreement.
F. Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
paid by the Fund.
LEUTHOLD FUNDS, INC. FIRSTAR MUTUAL FUND SERVICES, LLC
By:________________________________ By:__________________________________
6
TRANSFER AGENT AGREEMENT
------------------------
THIS AGREEMENT is made and entered into on this ____day of ______,
2000, by and between LEUTHOLD FUNDS, INC., on behalf of Grizzly Short Fund
(hereinafter referred to as the "Fund") and FIRSTAR MUTUAL FUND SERVICES, LLC, a
limited liability company organized under the laws of the State of Wisconsin
(hereinafter referred to as the "Agent").
W I T N E S S E T H :
WHEREAS, the Fund is an open-end management investment company which
is registered under the Investment Company Act of 1940; and
WHEREAS, the Agent is in the business of administering transfer and
dividend disbursing agent functions for the benefit of its customers;
NOW, THEREFORE, the Fund and the Agent do mutually promise and agree
as follows:
1. Terms of Appointment; Duties of the Agent
-----------------------------------------
Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints the Agent to act as transfer agent and dividend
disbursing agent.
The Agent shall perform all of the customary services of a transfer
agent and dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to:
A. Receive orders for the purchase of shares;
B. Process purchase orders and issue the appropriate number of
certificated or uncertificated shares with such uncertificated shares
being held in the appropriate shareholder account;
C. Process redemption requests received in good order;
D. Pay monies in accordance with the instructions of redeeming
shareholders;
E. Process transfers of shares in accordance with the shareowner's
instructions;
F. Process exchanges between funds within the same family of funds;
G. Issue and/or cancel certificates as instructed; replace lost, stolen
or destroyed certificates upon receipt of satisfactory indemnification
or surety bond;
<PAGE>
H. Prepare and transmit payments for dividends and distributions declared
by the Fund;
I. Make changes to shareholder records, including, but not limited to,
address changes in plans (i.e., systematic withdrawal, automatic
investment, dividend reinvestment, etc.);
J. Record the issuance of shares of the Fund and maintain, pursuant to
Section Rule 17Ad-10(e), a record of the total number of shares of the
Fund which are authorized, issued and outstanding;
K. Prepare shareholder meeting lists and, if applicable, mail, receive
and tabulate proxies;
L. Mail shareholder reports and prospectuses to current shareholders;
M. Prepare and file U.S. Treasury Department forms 1099 and other
appropriate information returns required with respect to dividends and
distributions for all shareholders;
N. Provide shareholder account information upon request and prepare and
mail confirmations and statements of account to shareholders for all
purchases, redemptions and other confirmable transactions as agreed
upon with the Fund; and
O. Provide a Blue Sky System which will enable the Fund to monitor the
total number of shares sold in each state. In addition, the Fund shall
identify to the Agent in writing those transactions and assets to be
treated as exempt from the Blue Sky reporting to the Fund for each
state. The responsibility of the Agent for the Fund's Blue Sky state
registration status is solely limited to the initial compliance by the
Fund and the reporting of such transactions to the Fund.
2. Compensation
------------
The Fund agrees to pay the Agent for performance of the duties listed
in this Agreement; the fees and out-of-pocket expenses include, but are not
limited to the following: printing, postage, forms, stationery, record
retention, mailing, insertion, programming, labels, shareholder lists and proxy
expenses.
These fees and reimbursable expenses may be changed from time to time
subject to mutual written agreement between the Fund and the Agent.
The Fund agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
2
<PAGE>
3. Representations of Agent
------------------------
The Agent represents and warrants to the Fund that:
A. It is a limited liability company duly organized, existing and in good
standing under the laws of Wisconsin;
B. It is duly qualified to carry on its business in the state of
Wisconsin;
C. It is empowered under applicable laws and by its organizational and
operational documents to enter into and perform this Agreement;
D. All requisite corporate proceedings have been taken to authorize it to
enter and perform this Agreement; and
E. It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement.
4. Representations of the Fund
---------------------------
The Fund represents and warrants to the Agent that:
A. The Fund is an open-end diversified investment company under the
Investment Company Act of 1940;
B. The Fund is a corporation or business organized, existing, and in good
standing under the laws of Maryland;
C. The Fund is empowered under applicable laws and by its Corporate
Charter and bylaws to enter into and perform this Agreement;
D. All necessary proceedings required by the Corporate Charter have been
taken to authorize it to enter into and perform this Agreement;
E. The Fund will comply with all applicable requirements of the
Securities and Exchange Acts of 1933 and 1934, as amended, the
Investment Company Act of 1940, as amended, and any laws, rules and
regulations of governmental authorities having jurisdiction; and
F. A registration statement under the Securities Act of 1933 is currently
effective and will remain effective, and appropriate state securities
law filings have been made and will continue to be made, with respect
to all shares of the Fund being offered for sale.
3
<PAGE>
5. Covenants of Fund and Agent
---------------------------
The Fund shall furnish the Agent a certified copy of the resolution of
the Board of Directors of the Fund authorizing the appointment of the Agent and
the execution of this Agreement. The Fund shall provide to the Agent a copy of
the Corporate Charter, bylaws of the Corporation, and all amendments.
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the rules thereunder, the Agent agrees that all such records prepared or
maintained by the Agent relating to the services to be performed by the Agent
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such section and rules and will be surrendered
to the Fund on and in accordance with its request.
6. Indemnification; Remedies Upon Breach
-------------------------------------
The Agent agrees to use reasonable care and act in good faith in
performing its duties hereunder.
Notwithstanding the foregoing, the Agent shall not be liable or
responsible for delays or errors occurring by reason of circumstances beyond its
control, including acts of civil or military authority, national or state
emergencies, fire, mechanical or equipment failure, flood or catastrophe, acts
of God, insurrection or war. In the event of a mechanical breakdown beyond its
control, the Agent shall take all reasonable steps to minimize service
interruptions for any period that such interruption continues beyond the Agent's
control. The Agent will make every reasonable effort to restore any lost or
damaged data, and the correcting of any errors resulting from such a breakdown
will be at the Agent's expense. The Agent agrees that it shall, at all times,
have reasonable contingency plans with appropriate parties, making reasonable
provision for emergency use of electrical data processing equipment to the
extent appropriate equipment is available. Representatives of Leuthold Funds,
Inc. shall be entitled to inspect the Agent's premises and operating
capabilities at any time during regular business hours of the Agent, upon
reasonable notice to the Agent.
The Fund will indemnify and hold the Agent harmless against any and
all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action or suit not
resulting from the Agent's bad faith or negligence, and arising out of or in
connection with the Agent's duties on behalf of the Fund hereunder.
Further, the Fund will indemnify and hold the Agent harmless against
any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from any claim, demand, action
or suit as a result of the negligence of the Fund or the principal underwriter
(unless contributed to by the Agent's own negligence or bad faith); or as a
result of the Agent acting upon telephone instructions relating to the exchange
or redemption of shares received by the Agent and reasonably believed by the
Agent to have
4
<PAGE>
originated from the record owner of the subject shares; or as a result of the
Agent acting upon any instructions executed or orally communicated by a duly
authorized officer or employee of the Fund, according to such lists of
authorized officers and employees furnished to the Agent and as amended from
time to time in writing by a resolution of the Board of Directors of the Fund;
or as a result of acting in reliance upon any genuine instrument or stock
certificate signed, countersigned or executed by any person or persons
authorized to sign, countersign or execute the same.
In order for this section to apply, it is understood that if in any
case the Fund may be asked to indemnify or hold harmless the Agent, the Fund
shall be advised of all pertinent facts concerning the situation in question,
and it is further understood that the Agent will use reasonable care to notify
the Fund promptly concerning any situation which presents or appears likely to
present a claim for indemnification against the Fund. The Fund shall have the
option to defend the Agent against any claim which may be the subject of this
indemnification and, in the event that the Fund so elects, the Agent will so
notify the Fund, and thereupon the Fund shall take over complete defense of the
claim and the Agent shall sustain no further legal or other expenses in such
situation for which the Agent shall seek indemnification under this section. The
Agent will in no case confess any claim or make any compromise in any case in
which the Fund will be asked to indemnify the Agent, except with the Fund's
prior written consent.
7. Confidentiality
---------------
The Agent agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Fund and its
shareholders and shall not be disclosed to any other party, except after prior
notification to and approval in writing by the Fund, which approval shall not be
unreasonably withheld and may not be withheld where the Agent may be exposed to
civil or criminal contempt proceedings for failure to comply after being
requested to divulge such information by duly constituted authorities.
8. Wisconsin Law to Apply
----------------------
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the state of Wisconsin.
9. Amendment, Assignment, Termination and Notice
---------------------------------------------
A. This Agreement may be amended by the mutual written consent of the
parties.
B. This Agreement may be terminated upon ninety (90) day's written notice
given by one party to the other.
C. This Agreement and any right or obligation hereunder may not be
assigned by either party without the signed, written consent of the
other party.
5
<PAGE>
D. Any notice required to be given by the parties to each other under the
terms of this Agreement shall be in writing, addressed and delivered,
or mailed to the principal place of business of the other party.
E. In the event that the Fund gives to the Agent its written intention to
terminate and appoint a successor transfer agent, the Agent agrees to
cooperate in the transfer of its duties and responsibilities to the
successor, including any and all relevant books, records and other
data established or maintained by the Agent under this Agreement.
F. Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
paid by the Fund.
LEUTHOLD FUNDS, INC. FIRSTAR MUTUAL FUND SERVICES, LLC
By: _________________________________ By: __________________________________
6
FUND ACCOUNTING SERVICING AGREEMENT
-----------------------------------
THIS AGREEMENT between Leuthold Funds, Inc., a Maryland Corporation,
on behalf of Leuthold Select Industries Fund, hereinafter called the "Fund," and
Firstar Mutual Fund Services, LLC, a Wisconsin limited liability company,
hereinafter called "Firstar," is entered into on this ________ day of
__________, 2000.
W I T N E S S E T H :
WHEREAS, the Fund is an open-end management investment company which
is registered under the Investment Company Act of 1940; and
WHEREAS, Firstar is in the business of providing, among other things,
mutual fund accounting services to investment companies;
NOW, THEREFORE, the parties do mutually promise and agree as follows:
1. Services. Firstar agrees to provide the following mutual fund
accounting services to the Fund:
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date +1 basis using
security trade information communicated from the investment
manager on a timely basis.
(2) For each valuation date, obtain prices from a pricing source
approved by the Board of Directors and apply those prices to
the portfolio positions. For those securities where market
quotations are not readily available, the Board of Directors
shall approve, in good faith, the method for determining the
fair value for such securities.
(3) Identify interest and dividend accrual balances as of each
valuation date and calculate gross earnings on investments
for the accounting period.
(4) Determine gain/loss on security sales and identify them as
to short- or long-term status; account for periodic
distributions of gains or losses to shareholders and
maintain undistributed gain or loss balances as of each
valuation date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense accrual
amounts as directed by the Fund as to methodology, rate or
dollar amount.
<PAGE>
(2) Record payments for Fund expenses upon receipt of written
authorization from the Fund.
(3) Account for fund expenditures and maintain expense accrual
balances at the level of accounting detail, as agreed upon
by Firstar and the Fund.
(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
(1) Account for fund share purchases, sales, exchanges,
transfers, dividend reinvestments, and other fund share
activity as reported by the transfer agent on a timely
basis.
(2) Apply equalization accounting as directed by the Fund.
(3) Determine net investment income (earnings) for the Fund as
of each valuation date. Account for periodic distributions
of earnings to shareholders and maintain undistributed net
investment income balances as of each valuation date.
(4) Maintain a general ledger for the Fund in the form as agreed
upon.
(5) For each day the Fund is open as defined in the prospectus
determine the net asset value according to the accounting
policies and procedures set forth in the prospectus.
(6) Calculate per share net asset value, per share net earnings,
and other per share amounts reflective of fund operation at
such time as required by the nature and characteristics of
the Fund.
(7) Communicate, at an agreed upon time, the per share price for
each valuation date to parties as agreed upon from time to
time.
(8) Prepare monthly reports which document the adequacy of
accounting detail to support month-end ledger balances.
D. Tax Accounting Services:
(1) Maintain tax accounting records for the investment portfolio
of the Fund to support the tax reporting required for
IRS-defined regulated investment companies.
(2) Maintain tax lot detail for the investment portfolio.
2
<PAGE>
(3) Calculate taxable gain/loss on security sales using the tax
cost basis designated by the Fund.
(4) Provide the necessary financial information to support the
taxable components of income and capital gains distributions
to the transfer agent to support tax reporting to the
shareholders.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support financial
statement preparation by making the fund accounting records
available to the Fund, Leuthold Weeden Capital Management, LLC,
the Securities and Exchange Commission, and the outside auditors.
(2) Maintain accounting records according to the Investment Company
Act of 1940 and regulations provided thereunder.
2. Changes in Accounting Procedures. Any resolution passed by the
Board of Directors that affects accounting practices and procedures under this
agreement shall be effective upon written receipt and acceptance by Firstar.
3. Changes in Equipment, Systems, Service, Etc. Firstar reserves the
right to make changes from time to time, as it deems advisable, relating to its
services, systems, programs, rules, operating schedules and equipment, so long
as such changes do not adversely affect the service provided to the Fund under
this Agreement.
4. Compensation. Firstar shall be compensated for providing the
services set forth in this Agreement in accordance with the Fee Schedule
attached hereto as Exhibit A and as mutually agreed upon and amended from time
to time.
5. Performance of Service. Firstar shall exercise reasonable care in
the performance of its duties under the Agreement. The Fund agrees to reimburse
and make Firstar whole for any loss or damages (including reasonable fees and
expenses of legal counsel) arising out of or in connection with its actions
under this Agreement so long as Firstar acts in good faith and is not negligent
or guilty of any willful misconduct.
Firstar shall not be liable or responsible for delays or errors
occurring by reason of circumstances beyond its control, including acts of civil
or military authority, natural or state emergencies, fire, mechanical breakdown,
flood or catastrophe, acts of God, insurrection, war, riots or failure of
transportation, communication or power supply.
In the event of a mechanical breakdown beyond its control, Firstar
shall take all reasonable steps to minimize service interruptions for any period
that such interruption continues beyond Firstar's control. Firstar will make
every reasonable effort to restore any lost or damaged data and the correcting
of any errors resulting from such a breakdown will be
3
<PAGE>
at the expense of Firstar. Firstar agrees that it shall at all times have
reasonable contingency plans with appropriate parties, making reasonable
provision for emergency use of electrical data processing equipment to the
extent appropriate equipment is available. Representatives of the Fund shall be
entitled to inspect Firstar's premises and operating capabilities at any time
during regular business hours of Firstar, upon reasonable notice to Firstar.
This indemnification includes any act, omission to act, or delay by
Firstar in reliance upon, or in accordance with, any written or oral instruction
it receives from any duly authorized officer of the Fund.
Regardless of the above, Firstar reserves the right to reprocess and
correct administrative errors at its own expense.
6. No Agency Relationship. Nothing herein contained shall be deemed to
authorize or empower Firstar to act as agent for any other party to this
Agreement, or to conduct business in the name of, or for the account of, any
other party to this Agreement.
7. Ownership of Records. All records prepared or maintained by Firstar
on behalf of the Fund remain the property of the Fund and will be surrendered
promptly on the written request of an authored officer of the Fund.
8. Confidentiality. Firstar shall handle in confidence all information
relating to the Fund's business, which is received by Firstar during the course
of rendering any service hereunder.
9. Data Necessary to Perform Services. The Fund or its agent, which
may be Firstar, shall furnish to Firstar the data necessary to perform the
services described herein at times and in such form as mutually agreed upon.
10. Notification of Error. The Fund will notify Firstar of any
balancing or control error caused by Firstar within three (3) business days
after receipt of any reports rendered by Firstar to the Fund, or within three
(3) business days after discovery of any error or omission not covered in the
balancing or control procedure, or within three (3) business days of receiving
notice from any shareholder.
11. Term of Agreement. This Agreement may be terminated by either
party upon giving ninety (90) days prior written notice to the other party or
such shorter period as is mutually agreed upon by the parties. However, this
Agreement may be replaced or modified by a subsequent agreement between the
parties.
12. Duties in the Event of Termination. In the event that in
connection with termination a Successor to any of Firstar's duties or
responsibilities hereunder is designated by the Fund by written notice to
Firstar, Firstar will promptly, upon such termination and at the expense of the
Fund, transfer to such Successor all relevant books, records, correspondence and
other data established or maintained by Firstar under this Agreement in a form
reasonably acceptable to the Fund (if such form differs from the form in
4
<PAGE>
which Firstar has maintained the same, the Fund shall pay any expenses
associated with transferring the same to such form), and will cooperate in the
transfer of such duties and responsibilities, including provision for assistance
from Firstar's personnel in the establishment of books, records and other data
by such successor.
13. Choice of Law. This Agreement shall be construed in accordance
with the laws of the State of Wisconsin.
IN WITNESS WHEREOF, the due execution hereof on the date first above
written.
FIRSTAR MUTUAL FUND SERVICES, LLC
By ________________________________
LEUTHOLD FUNDS, INC.
By ________________________________
5
FUND ACCOUNTING SERVICING AGREEMENT
-----------------------------------
THIS AGREEMENT between Leuthold Funds, Inc., a Maryland Corporation,
on behalf of Grizzly Short Fund, hereinafter called the "Fund," and Firstar
Mutual Fund Services, LLC, a Wisconsin limited liability company, hereinafter
called "Firstar," is entered into on this _____ day of __________, 2000.
W I T N E S S E T H :
WHEREAS, the Fund is an open-end management investment company which
is registered under the Investment Company Act of 1940; and
WHEREAS, Firstar is in the business of providing, among other things,
mutual fund accounting services to investment companies;
NOW, THEREFORE, the parties do mutually promise and agree as follows:
1. Services. Firstar agrees to provide the following mutual fund
accounting services to the Fund:
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date +1 basis using
security trade information communicated from the investment
manager on a timely basis.
(2) For each valuation date, obtain prices from a pricing source
approved by the Board of Directors and apply those prices to
the portfolio positions. For those securities where market
quotations are not readily available, the Board of Directors
shall approve, in good faith, the method for determining the
fair value for such securities.
(3) Identify interest and dividend accrual balances as of each
valuation date and calculate gross earnings on investments
for the accounting period.
(4) Determine gain/loss on security sales and identify them as
to short- or long-term status; account for periodic
distributions of gains or losses to shareholders and
maintain undistributed gain or loss balances as of each
valuation date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense accrual
amounts as directed by the Fund as to methodology, rate or
dollar amount.
<PAGE>
(2) Record payments for Fund expenses upon receipt of written
authorization from the Fund.
(3) Account for fund expenditures and maintain expense accrual
balances at the level of accounting detail, as agreed upon
by Firstar and the Fund.
(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
(1) Account for fund share purchases, sales, exchanges,
transfers, dividend reinvestments, and other fund share
activity as reported by the transfer agent on a timely
basis.
(2) Apply equalization accounting as directed by the Fund.
(3) Determine net investment income (earnings) for the Fund as
of each valuation date. Account for periodic distributions
of earnings to shareholders and maintain undistributed net
investment income balances as of each valuation date.
(4) Maintain a general ledger for the Fund in the form as agreed
upon.
(5) For each day the Fund is open as defined in the prospectus
determine the net asset value according to the accounting
policies and procedures set forth in the prospectus.
(6) Calculate per share net asset value, per share net earnings,
and other per share amounts reflective of fund operation at
such time as required by the nature and characteristics of
the Fund.
(7) Communicate, at an agreed upon time, the per share price for
each valuation date to parties as agreed upon from time to
time.
(8) Prepare monthly reports which document the adequacy of
accounting detail to support month-end ledger balances.
D. Tax Accounting Services:
(1) Maintain tax accounting records for the investment portfolio
of the Fund to support the tax reporting required for
IRS-defined regulated investment companies.
(2) Maintain tax lot detail for the investment portfolio.
2
<PAGE>
(3) Calculate taxable gain/loss on security sales using the tax
cost basis designated by the Fund.
(4) Provide the necessary financial information to support the
taxable components of income and capital gains distributions
to the transfer agent to support tax reporting to the
shareholders.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support financial
statement preparation by making the fund accounting records
available to the Fund, Leuthold Weeden Capital Management,
LLC, the Securities and Exchange Commission, and the outside
auditors.
(2) Maintain accounting records according to the Investment
Company Act of 1940 and regulations provided thereunder.
2. Changes in Accounting Procedures. Any resolution passed by the
Board of Directors that affects accounting practices and procedures under this
agreement shall be effective upon written receipt and acceptance by Firstar.
3. Changes in Equipment, Systems, Service, Etc. Firstar reserves the
right to make changes from time to time, as it deems advisable, relating to its
services, systems, programs, rules, operating schedules and equipment, so long
as such changes do not adversely affect the service provided to the Fund under
this Agreement.
4. Compensation. Firstar shall be compensated for providing the
services set forth in this Agreement in accordance with the Fee Schedule
attached hereto as Exhibit A and as mutually agreed upon and amended from time
to time.
5. Performance of Service. Firstar shall exercise reasonable care in
the performance of its duties under the Agreement. The Fund agrees to reimburse
and make Firstar whole for any loss or damages (including reasonable fees and
expenses of legal counsel) arising out of or in connection with its actions
under this Agreement so long as Firstar acts in good faith and is not negligent
or guilty of any willful misconduct.
Firstar shall not be liable or responsible for delays or errors
occurring by reason of circumstances beyond its control, including acts of civil
or military authority, natural or state emergencies, fire, mechanical breakdown,
flood or catastrophe, acts of God, insurrection, war, riots or failure of
transportation, communication or power supply.
In the event of a mechanical breakdown beyond its control, Firstar
shall take all reasonable steps to minimize service interruptions for any period
that such interruption continues beyond Firstar's control. Firstar will make
every reasonable effort to restore any lost or damaged data and the correcting
of any errors resulting from such a breakdown will be
3
<PAGE>
at the expense of Firstar. Firstar agrees that it shall at all times have
reasonable contingency plans with appropriate parties, making reasonable
provision for emergency use of electrical data processing equipment to the
extent appropriate equipment is available. Representatives of the Fund shall be
entitled to inspect Firstar's premises and operating capabilities at any time
during regular business hours of Firstar, upon reasonable notice to Firstar.
This indemnification includes any act, omission to act, or delay by
Firstar in reliance upon, or in accordance with, any written or oral instruction
it receives from any duly authorized officer of the Fund.
Regardless of the above, Firstar reserves the right to reprocess and
correct administrative errors at its own expense.
6. No Agency Relationship. Nothing herein contained shall be deemed to
authorize or empower Firstar to act as agent for any other party to this
Agreement, or to conduct business in the name of, or for the account of, any
other party to this Agreement.
7. Ownership of Records. All records prepared or maintained by Firstar
on behalf of the Fund remain the property of the Fund and will be surrendered
promptly on the written request of an authored officer of the Fund.
8. Confidentiality. Firstar shall handle in confidence all information
relating to the Fund's business, which is received by Firstar during the course
of rendering any service hereunder.
9. Data Necessary to Perform Services. The Fund or its agent, which
may be Firstar, shall furnish to Firstar the data necessary to perform the
services described herein at times and in such form as mutually agreed upon.
10. Notification of Error. The Fund will notify Firstar of any
balancing or control error caused by Firstar within three (3) business days
after receipt of any reports rendered by Firstar to the Fund, or within three
(3) business days after discovery of any error or omission not covered in the
balancing or control procedure, or within three (3) business days of receiving
notice from any shareholder.
11. Term of Agreement. This Agreement may be terminated by either
party upon giving ninety (90) days prior written notice to the other party or
such shorter period as is mutually agreed upon by the parties. However, this
Agreement may be replaced or modified by a subsequent agreement between the
parties.
12. Duties in the Event of Termination. In the event that in
connection with termination a Successor to any of Firstar's duties or
responsibilities hereunder is designated by the Fund by written notice to
Firstar, Firstar will promptly, upon such termination and at the expense of the
Fund, transfer to such Successor all relevant books, records, correspondence and
other data established or maintained by Firstar under this Agreement in a form
reasonably acceptable to the Fund (if such form differs from the form in
4
<PAGE>
which Firstar has maintained the same, the Fund shall pay any expenses
associated with transferring the same to such form), and will cooperate in the
transfer of such duties and responsibilities, including provision for assistance
from Firstar's personnel in the establishment of books, records and other data
by such successor.
13. Choice of Law. This Agreement shall be construed in accordance
with the laws of the State of Wisconsin.
IN WITNESS WHEREOF, the due execution hereof on the date first above
written.
FIRSTAR MUTUAL FUND SERVICES, LLC
By ________________________________
LEUTHOLD FUNDS, INC.
By _______________________________
5
LEUTHOLD FUNDS, INC.
SERVICE PLAN
FOR
LEUTHOLD SELECT INDUSTRIES FUND
AND
GRIZZLY SHORT FUND
This Service Plan (the "Plan") has been adopted by the Board of
Directors of Leuthold Funds, Inc. (the "Company") for the Leuthold Select
Industries Fund and the Grizzly Short Fund (collectively, the "Funds").
Section 1. Expenses.
--------
The Company may incur expenses under the Plan in an amount not to
exceed 0.25% annually of each Fund's average daily net assets.
Section 2. Payments for Administrative Support Services Covered by Plan.
------------------------------------------------------------
(a) The Company may pay securities dealers, brokers, financial
institutions or other industry professionals such as investment advisers,
accountants and estate planning firms (each a "Service Organization") for
Administrative Support Services (as hereinafter defined) provided with respect
to its customers' shares of the Funds. Administrative Support Services shall be
provided pursuant to Servicing Agreements approved by the officers of the
Company ("Servicing Agreements").
(b) Fees paid to a Service Organization under subsection (a) above may
be paid at an annual rate of up to 0.25% of the average daily net assets
attributable to the shares of each of the Funds which are owned of record or
beneficially by that Service Organization's customers for whom such Service
Organization is the dealer of record or shareholder of record or with whom it
has a servicing relationship. Such fees shall be calculated and accrued daily,
paid monthly and computed in the manner set forth in the Servicing Agreement.
(c) "Administrative Support Services" include but are not limited to:
(i) processing dividend and distribution payments on behalf of customers; (ii)
arranging for bank wires; (iii) providing subaccounting with respect to shares
of the Funds beneficially owned by customers or the information necessary to the
Company for subaccounting; (iv) if required by law, forwarding shareholder
communications from the Company (such as proxies; shareholder reports; annual
and semi-annual financial statements and dividends; and distribution and tax
notices to customers); (v) assisting in processing purchase, exchange and
redemption requests from customers and in placing such orders with the Company's
service contractors; (vi) assisting customers in changing dividend options,
account designations and addresses; (vii) providing such other similar services
as the Company may reasonably request to the extent the Service Organization is
permitted to do so under applicable statutes, rules and regulations; provided,
however, that such term does not include "personal service and/or the
maintenance of shareholder accounts" within the meaning of the Rules of Fair
Practice of the National
<PAGE>
Association of Securities Dealers, Inc., such as responding to customers'
inquiries and providing information on their investments ("Shareholder Liaison
Services").
Section 3. Expenses Allocated; Compliance.
------------------------------
Amounts paid by a Fund under the Plan must be for services rendered
for or on behalf of the holders of such Fund's shares.
Section 4. Reports to Company.
------------------
So long as this Plan is in effect, the officers of the Company shall
provide the Company's Board of Directors, and the Directors shall review, at
least quarterly, a written report of the amounts expended pursuant to the Plan
and the purposes for which such expenditures were made.
Section 5. Approval of Plan.
----------------
This Plan will become effective on June 15, 2000 following its
approval by a majority of the Board of Directors, including a majority of those
Directors who are not "interested persons" (as defined in the Investment Company
Act of 1940) of the Company and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements entered into in
connection with the Plan (the "Disinterested Directors"), pursuant to a vote
cast in person at a meeting called for the purpose of voting on the approval of
the Plan.
Section 6. Continuance of Plan.
-------------------
Unless sooner terminated in accordance with the terms hereof, this
Plan shall continue until June 15, 2001, and thereafter for so long as its
continuance is specifically approved at least annually by the Company's Board of
Directors in the manner described in Section 5 hereof.
Section 7. Amendments.
----------
This Plan may be amended at any time by the Board of Directors
provided that any material amendments of the terms of the Plan shall become
effective only upon approval in the manner described in Section 5 hereof.
Section 8. Termination.
-----------
This Plan, as to any Fund, is terminable without penalty at any time
by a vote of a majority of the Disinterested Directors.
2
FOLEY & LARDNER
ATTORNEYS AT LAW
CHICAGO FIRSTAR CENTER SACRAMENTO
DENVER 777 EAST WISCONSIN AVENUE SAN DIEGO
JACKSONVILLE MILWAUKEE, WISCONSIN 53202-5367 SAN FRANCISCO
LOS ANGELES TELEPHONE (414) 271-2400 TALLAHASSEE
MADISON FACSIMILE (414) 297-4900 TAMPA
MILWAUKEE WASHINGTON, D.C.
ORLANDO WEST PALM BEACH
June 15, 2000
Leuthold Funds, Inc.
100 North Sixth Street
Suite 700A
Minneapolis, MN 55403
Ladies & Gentlemen:
We have acted as counsel for you in connection with the preparation of
an Amended Registration Statement on Form N-1A relating to the sale by you of an
indefinite amount of Leuthold Funds, Inc. Common Stock (such Common Stock being
hereinafter referred to as the "Stock") in the manner set forth in the Amended
Registration Statement to which reference is made. In this connection we have
examined: (a) the Amended Registration Statement on Form N-1A; (b) your Articles
of Incorporation and Bylaws, as amended to date; (c) corporate proceedings
relative to the authorization for issuance of the Stock; and (d) such other
proceedings, documents and records as we have deemed necessary to enable us to
render this opinion.
Based upon the foregoing, we are of the opinion that the shares of
Stock when sold as contemplated in the Amended Registration Statement will be
legally issued, fully paid and nonassessable
We hereby consent to the use of this opinion as an exhibit to the
Amended Registration Statement on Form N-1A. In giving this consent, we do not
admit that we are experts within the meaning of Section 11 of the Securities Act
of 1933, as amended, or within the category of persons whose consent is required
by Section 7 of said Act.
Very truly yours,
/s/ Foley & Lardner
Foley & Lardner
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our report
and to all references to our firm included in or made a part of this Form N-1A
Registration Statement, Post-Effective Amendment No. 6, for Leuthold Funds, Inc.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
March 29, 2000
